Applications of time-delayed backward stochastic differential equations to pricing, hedging and portfolio management in insurance and finance

• Autorzy: Łukasz Delong
• Języki publikacji: EN

Abstrakty

EN

We investigate novel applications of a new class of equations which we call time-delayed backward stochastic differential equations. Time-delayed BSDEs may arise in insurance and finance in an attempt to find an investment strategy and an investment portfolio which should replicate a liability or meet a target depending on the strategy applied or the past values of the portfolio. In this setting, a managed investment portfolio serves simultaneously as the underlying security on which the liability/target is contingent and as a replicating portfolio for that liability/target. This is usually the case of capital-protected investments and performance-linked pay-offs. We give examples of pricing, hedging and portfolio management problems (asset-liability management problems) which could be investigated in the framework of time-delayed BSDEs. We focus on participating contracts and variable annuities. We believe that time-delayed BSDEs could offer a tool for studying investment life insurance contracts from a new and desirable perspective.

Kategorie tematyczne

• 49N90: Applications of optimal control and differential games
• 60G99: None of the above, but in this section
• 60H30: Applications of stochastic analysis (to PDE, etc.)

• Wydawca: Institute of Mathematics Polish Academy of Sciences
• Czasopismo: Applicationes Mathematicae
• Rocznik: 2012
• Tom: 39
• Numer: 4
• Strony: 463-488

Daty

wydano

2012

Twórcy

autor

Łukasz Delong

• Institute of Econometrics, Warsaw School of Economics, Al. Niepodległości 162, 02-554 Warszawa, Poland

Identyfikatory

DOI

10.4064/am39-4-5