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Document Details : Title: A Discrete Time Benchmark Approach for Insurance and Finance Author(s): BÜHLMANN, Hans , PLATEN, Eckhard Journal: ASTIN Bulletin Volume: 33 Issue: 2 Date: November 2003 Pages: 153-172 DOI: 10.2143/AST.33.2.503688 Abstract : This paper proposes a consistent approach to discrete time valuation in insurance and finance. This approach uses the growth optimal portfolio as reference unit or benchmark. When used as benchmark, it is shown that all benchmarked price processes are supermartingales. Benchmarked fair price processes are characterized as martingales. No measure transformation is needed for the fair pricing of insurance policies and derivatives. The standard actuarial pricing rule is obtained as a particular case of fair pricing when the contingent claim is independent from the growth optimal portfolio. |
