In this paper we propose a multi-state model for the evaluation of the conversion option contract. The multi-state model is based on age-indexed semi-Markov chains that are able to reproduce many important aspects that influence the valuation of the option such as the durationproblem,thetimenon-homogeneityandtheageingeffect.Thevalueoftheconversion option is evaluated after the formal description of this contract.
Multi-state models for evaluating conversion options in life insurance
D'AMICO, GUGLIELMO;PETRONI, FILIPPO
2017-01-01
Abstract
In this paper we propose a multi-state model for the evaluation of the conversion option contract. The multi-state model is based on age-indexed semi-Markov chains that are able to reproduce many important aspects that influence the valuation of the option such as the durationproblem,thetimenon-homogeneityandtheageingeffect.Thevalueoftheconversion option is evaluated after the formal description of this contract.
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