Year: 2003
Type: article
Abstract: This paper proposes a consistent approach to discrete time valuation in insurance and finance. This approach uses the growth optimal portfolio as reference unit or benchmark. When used as benchmark, it is shown that all benchmarked price processes are supermartingales. Benchmarked fair price processes are characterized as martingales. No measure transformation is needed for the fair pricing of insurance policies and derivatives. The standard actuarial pricing rule is obtained as a particular case of fair pricing when the contingent claim is independent from the growth optimal portfolio. 1991 Mathematics Subject Classification: primary 90A12 secondary 60G30, 62P20 JEL Classification: G10, G13
Source: Astin Bulletin
Authors: Hans Bühlmann, Eckhard Platen
Institutions: ETH Zurich, University of Technology Sydney
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: bronze
OpenAlex ID: W2146925501