Guaranties, Interest Rates, Insurance
Author | : Export-Import Bank of Washington |
Publisher | : |
Total Pages | : 11 |
Release | : 1956 |
Genre | : Exports |
ISBN | : |
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Author | : Export-Import Bank of Washington |
Publisher | : |
Total Pages | : 11 |
Release | : 1956 |
Genre | : Exports |
ISBN | : |
Author | : |
Publisher | : |
Total Pages | : 11 |
Release | : 1956 |
Genre | : |
ISBN | : |
Author | : Van Son Lai |
Publisher | : |
Total Pages | : |
Release | : 2015 |
Genre | : |
ISBN | : |
We extend the financial guarantee insurance literature by modeling, under stochastic interest rates, private financial guarantees when the guarantor potentially defaults. By performing numerical simulations under plausible parameters values, we characterize the differential impact of the incorporation of stochasticity of interest rates on the valuation of both public and private guarantees.
Author | : Tim C. Opler |
Publisher | : |
Total Pages | : 698 |
Release | : 1995 |
Genre | : Day trading (Securities) |
ISBN | : |
Author | : Van Son Lai |
Publisher | : Québec : Direction de la recherche, Faculté des sciences de l'administration, Université Laval |
Total Pages | : 30 |
Release | : 1993 |
Genre | : |
ISBN | : |
Author | : United States. General Accounting Office |
Publisher | : |
Total Pages | : 68 |
Release | : 2003 |
Genre | : Pension trusts |
ISBN | : |
Author | : American Bankers Association |
Publisher | : |
Total Pages | : 48 |
Release | : 1959 |
Genre | : |
ISBN | : |
Author | : J David Cummins |
Publisher | : |
Total Pages | : 34 |
Release | : 2014 |
Genre | : |
ISBN | : |
Minimum interest rate guarantees are included in life insurance products in most countries, but the exact implementations of the guarantees vary significantly across countries. In this paper we develop models of interest rate guarantees in Denmark, Germany, Norway, the U.K., and the U.S. by constructing contracts designed to capture practices in each country. The European contracts include rather sophisticated investment surplus distribution mechanisms, whereas the U.S. contracts are simpler and do not involve an explicit bonus account. The models are compared empirically using simulation analysis. For low volatilities, the payoffs from the Danish, German and U.K. contracts are surprisingly similar to the payoff from the market index. However, for higher levels of volatility the contracts noticeably truncate the lower tail of the index return distribution. The U.S. and Norwegian contracts offer the lowest risk of all contracts but also have the lowest expected returns. Thus, investors in life insurance products encounter significantly different risk-return profiles depending on country of origin.
Author | : David Schrager |
Publisher | : |
Total Pages | : |
Release | : 2004 |
Genre | : |
ISBN | : |
We derive general pricing formulas for Rate of Return Guarantees in Regular Premium Unit Linked Insurance under stochastic interest rates. Our main contribution focusses on the effect of stochastic interest rates. First, we show the effect of stochastic interest rates can be interpreted as, what is known in the financial community as, a convexity correction. Second we link the LIBOR Market Model to our model of the economy. This allows us to find guarantee prices consistent with observed cap and swaption prices. Numerical results show the effect of this more sophisticated interest rate modelling is considerable. We also consider ways of approximating Asian option values through tight bounds. We show that we can obtain accurate bounds in spite of the high volatility induced by the long maturities of the guarantees.
Author | : Anders Grosen |
Publisher | : |
Total Pages | : |
Release | : 1998 |
Genre | : |
ISBN | : |
Interest rate guarantees are important elements of many financial contracts offered in today's financial markets. For example, life insurance policies often contain an explicit interest rate guarantee that ensures the investor a certain minimum return during some specified period. Sometimes the interest rate guarantee is of American type in the sense that it applies for a period of time chosen by the investor. In life insurance contracts this is labeled the surrender feature. This article analyzes the valuation of American or early exercisable interest rate guarantees. We draw on some recent results on American option pricing theory to obtain analytic formulas for the interest rate guarantees. The theoretic results are accompanied by numerical examples, and comparisons to European type guarantees are made.