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Affine processes for dynamic mortality and actuarial valuations. (English) Zbl 1129.91024

Summary: We address the risk analysis and market valuation of life insurance contracts in a jump-diffusion setup. We exploit the analytical tractability of affine processes to deal simultaneously with financial and demographic risks affecting a wide range of insurance covers. We then focus on mortality at pensionable ages and show how the risk of longevity can be taken into account. A parallel with the pricing of certain credit risky securities is drawn, in order to employ important results derived in that field.

MSC:

91B30 Risk theory, insurance (MSC2010)
60H10 Stochastic ordinary differential equations (aspects of stochastic analysis)
60H30 Applications of stochastic analysis (to PDEs, etc.)
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