Efficient Hedging and Pricing of Life Insurance Policies in a Jump-Diffusion Model

Abstract

This paper is devoted to the problem of hedging contingent claims in the framework of a two factors jump-diffusion model under initial budget constraint. We give explicit formulas for the so called efficient hedging. These results are applied for the pricing of equity linked-life insurance contracts.

Keywords:

• Efficient hedging
• Equity-linked life insurance
• Jump diffusion
• Quantile hedging

Mathematics Subject Classification:

• 60H30
• 91B28
• 91B30

ACKNOWLEDGMENTS

This work was supported by grants of NSERC 261855.