Journal article
From ruin theory to pricing reset guarantees and perpetual put options
Insurance, mathematics & economics, Vol.24(1), pp.3-14
1999
DOI: 10.1016/S0167-6687(98)00033-X
Abstract
We examine the joint distribution of the time of ruin, the surplus immediately before ruin, the deficit at ruin, and the cause of ruin. The time of ruin is analyzed in terms of its Laplace transform, which can naturally be interpreted as discounting. We present two financial applications – the pricing of reset guarantees for a mutual fund or an equity-indexed annuity, and the pricing of a perpetual American put option. In both cases, the logarithm of the price of the underlying asset is modeled as a shifted compound Poisson process. Hence the asset price process has downward discontinuities, with the times and amounts of the drops being random.
Details
- Title: Subtitle
- From ruin theory to pricing reset guarantees and perpetual put options
- Creators
- Hans U Gerber - University of LausanneElias S.W Shiu - University of Iowa
- Resource Type
- Journal article
- Publication Details
- Insurance, mathematics & economics, Vol.24(1), pp.3-14
- Publisher
- Elsevier B.V
- DOI
- 10.1016/S0167-6687(98)00033-X
- ISSN
- 0167-6687
- eISSN
- 1873-5959
- Language
- English
- Date published
- 1999
- Academic Unit
- Statistics and Actuarial Science
- Record Identifier
- 9984257618902771
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