Pricing rate of return guarantees in a Heath-Jarrow-Morton framework

Insurance: Mathematics and Economics

Volumn 25, Issue 3, 1999, Pages 307-325

  Miltersen, Kristian R ^a   Persson, Svein Arne ^b  

^a UNIVERSITY OF SOUTHERN DENMARK   (Denmark)

^b NORWEGIAN SCHOOL OF ECONOMICS   (Norway)

Author keywords

Heath Jarrow Morton term structure model; Interest rate guarantees; Maturity guarantees; Multi period guarantees; Stochastic interest rates

Indexed keywords

EID: 0038927298     PISSN: 01676687     EISSN: None     Source Type: Journal    
DOI: 10.1016/S0167-6687(99)00020-7     Document Type: Article

References (26)

1. Amin K.I., Jarrow R.A. Pricing options on risky assets in a stochastic interest rate economy. Mathematical Finance. 2(4):1992;217-237.
2. Bhattacharya, S., Constantinides, G.M. (Eds.), 1989. Theory of Valuation. Frontiers of Modern Financial Theory, Studies in Financial Economics vol. 1. Rowman & Littlefield, Totowa, NJ, USA.
3. Black F., Scholes M. The pricing of options and corporate liabilities. Journal of Political Economy. 81(3):1973;637-654.
4. Boyle P.P., Hardy M.R. Reserving for maturity guarantees; two approaches. Insurance: Mathematics and Economics. 21:1997;113-127.
5. Brennan M.J., Schwartz E.S. The pricing of equity-linked life insurance policies with an asset value guarantee. Journal of Financial Economics. 3:1976;195-213.
6. Brennan M.J., Schwartz E.S. Alternative investment strategies for the issuers of equity linked life insurance policies with an asset value guarantee. Journal of Business. 52:1979a;63-93.
7. Brennan, M.J., Schwartz E.S., 1979b. Pricing and Investment Strategies for Equity-Linked Life Insurance, The S.S. Huebner Foundation for Insurance Education, Wharton School, University of Pennsylvania, Philadelphia, USA.
8. Cox, J.C., Ingersoll, Jr., J.E., Ross, S.A., 1985. A Theory of the Term Structure of Interest Rates, Econometrica, 53 (2), 385-407. Reprinted in Bhattacharya and Constantinides (1989, pp. 129-151).
9. Cox, J.C., Ingersoll, Jr., J.E., Ross, S.A., 1985. A Theory of the Term Structure of Interest Rates, Econometrica, 53 (2), 385-407. Reprinted in Bhattacharya and Constantinides (1989, pp. 129-151).
10. Geman H., Karoui N.El., Rochet J.-C. Changes of numéraire, changes of probability measure and option pricing. Journal of Applied Probability. 32:1995;443-458.
11. Grosen A., Jørgensen P.L. Valuation of early exercisable interest rate guarantees. Journal of Risk and Insurance. 64:1997;481-503.
12. Harrison J.M., Kreps D.M. Martingales and arbitrage in multiperiod securities markets. Journal of Economic Theory. 20:1979;381-408.
13. Harrison, J.M., Pliska, S.R., 1981. Martingales and Stochastic Integrals in the Theory of Continuous Trading, Stochastic Processes and their Applications 11, 215-260. Addendum: Harrison and Pliska (1983).
14. Harrison J.M., Pliska S.R. A stochastic calculus model of continuous trading; complete markets. Stochastic Processes and their Applications. 15:1983;313-316.
15. Heath D., Jarrow R.A., Morton A.J. Bond pricing and the term structure of interest rates; a new methodology for contingent claims valuation. Econometrica. 60(1):1992;77-105.
16. Hipp, C., 1996. Options for Guaranteed Index-Linked Life Insurance in: Proceedings from AFIR (Actuarial Approach for Financial Risks. Sixth International Colloquium, vol. 2, Nürnberg, Germany, pp. 1463-1483.
17. Jamshidian F. An exact bond option formula. The Journal of Finance. XLIV(1):1989;205-209.
18. Jarrow, R.A., 1997. The HJM Model: Its Past, Present, and Future, Keynote Address at IAFE 1997 Conference.
19. Merton, R.C., 1973. Theory of rational option pricing. Bell Journal of Economics and Management Science, 4, 141-183. Reprinted in Merton (1990, Chapter 8).
20. Merton, R.C., 1973. Theory of rational option pricing. Bell Journal of Economics and Management Science, 4, 141-183. Reprinted in Merton (1990, Chapter 8).
21. Merton, R.C., 1990. Continuous-Time Finance. Basil Blackwell, Padstow, Great Britain.
22. Miltersen, K.R., Persson, S.-A., 1998. Guaranteed Investment Contracts: Distributed and Undistributed Excess Return, Working Paper, Institute of Finance and Management Science, Norwegian School of Economics and Business Administration, Helleveien 30, N-5045 Bergen, Norway.
23. Pedersen H.W., Shiu E.S.W. Evaluation of the GIC Rollover option. Insurance; Mathematics and Economics. 14:1994;117-127.
24. Persson S.-A., Aase K.K. Valuation of the minimum guaranteed return embedded in life insurance product. Journal of Risk and Insurance. 64(4):1997;599-617.
25. Vasicek O. An equilibrium characterization of the term structure. Journal of Financial Economics. 5:1977;177-188.
26. Walker, K.L., 1992. Guaranteed Investment Contracts: Risk Analysis and Portfolio Strategies, Richard D. Irwin, Homewood, Illinois 60430, USA.