Pricing Participating Products under a Generalized Jump-Diffusion Model

Abstract EN

We propose a model for valuing participating life insurance products under a generalized jump-diffusion model with a Markov-switching compensator.

It also nests a number of important and popular models in finance, including the classes of jump-diffusion models and Markovian regime-switching models.

The Esscher transform is employed to determine an equivalent martingale measure.

Simulation experiments are conducted to illustrate the practical implementation of the model and to highlight some features that can be obtained from our model.