Dependence between financial and actuarial risksnsion schemes (15/10/2024) (2 CPD)
Abstract:
Traditionally, valuation models in life insurance assume an independence between the financial risks and the mortality or longevity risks. This orthogonality between insurance and finance allows for to apply in the valuation procedure, a clear separation between on the one hand the discount effect and on the other hand the survival probabilities. This independence principle could seem reasonable at first sight. However, different circumstances could lead to correlation between demographic evolutions and financial markets. The recent effects of COVID illustrate perfectly this point. Ageing is another potential example of mortality phenomenon with expected consequences on financial investments. What happens if we introduce in the stochastic models of valuation used in life insurance a correlation between interest rates or risky returns and mortality intensities? The purpose of this seminar is to revisit the valuation of some life insurance products (pure endowment, term insurance, life annuities) in a financial and longevity stochastic environment with potential correlation between these two risks and to measure the effect of this correlation, depending on the kind of product.
Lecturer: Pierre Devolder, Professor UCL
Some practical information:
The training will take place using TEAMS. The link will be provided to the participants the day before the training will take place.
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