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Fluctuating interest rates

Published online by Cambridge University Press:  01 July 2016

J. H. Pollard
J. H. Pollard*
Affiliation:
Macquarie University
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Extract

The annual premium for a life assurance contract is obtained by equating the expected discounted value of the sum payable on death to the expected discounted value of the series of premiums, and loading the resultant net premium for expenses and contingencies. The approach is essentially deterministic. An adequate stochastic model of mortality is readily available, but it is of limited practical value. A life office writes a large number of policies on independent lives and, apart from the effects of a few very large policies, the overall mortality behaviour of its portfolio is effectively deterministic.

Type
Research Article
Information
Advances in Applied Probability , Volume 10 , Issue 4 , December 1978 , pp. 707 - 711
Copyright
Copyright © Applied Probability Trust 1978 

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References

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