Pricing of Embedded Inflation Options: Using stochastic scenarios - Tapa blanda

Van De Kreeke, Erwin

 
9783330084230: Pricing of Embedded Inflation Options: Using stochastic scenarios
Tapa blanda
ISBN 10: 3330084235 ISBN 13: 9783330084230
Editorial: LAP LAMBERT Academic Publishing, 2017

Sinopsis

This work uses stochastic scenarios to value embedded inflation options in insurance products. These scenarios are generated using the Jarrow Yildirim model. Three processes are modelled: nominal interest rates, real interest rates and an inflation index. The Hull-White model is used in this setting to model the nominal interest rate. Analytical formulas can be derived to price inflation-indexed derivatives. We will examine how these formulas can be used to calibrate the model to match market prices in order to obtain model parameters. We show that the calibration depends heavily on which instruments are used in the calibration. Using these model parameters, stochastic scenarios can be constructed. We demonstrate how embedded inflation options containing a path dependency can be valued using scenarios, and further provide prices of embedded inflation options of a fictional pension contract.

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Reseña del editor

This work uses stochastic scenarios to value embedded inflation options in insurance products. These scenarios are generated using the Jarrow Yildirim model. Three processes are modelled: nominal interest rates, real interest rates and an inflation index. The Hull-White model is used in this setting to model the nominal interest rate. Analytical formulas can be derived to price inflation-indexed derivatives. We will examine how these formulas can be used to calibrate the model to match market prices in order to obtain model parameters. We show that the calibration depends heavily on which instruments are used in the calibration. Using these model parameters, stochastic scenarios can be constructed. We demonstrate how embedded inflation options containing a path dependency can be valued using scenarios, and further provide prices of embedded inflation options of a fictional pension contract.

Biografía del autor

Erwin van de Kreeke resides in the capital of the Netherlands, Amsterdam. He has a double master's degree in Finance (Vrije Universiteit) and Actuarial Science and Quantitative (Universiteit van Amsterdam). In addition, he is also a qualified actuary. He currently works in the Insurance industry mainly involved in capital modelling and reporting.

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Editorial
LAP LAMBERT Academic Publishing
Año de publicación
2017
Idioma
Inglés
ISBN 10 
3330084235
ISBN 13 
9783330084230
Encuadernación
Tapa blanda
Número de páginas
72
Contacto del fabricante
no disponible
Persona responsable
no disponible