Author:
Bathke Theis,Christiansen Marcus C.
Abstract
AbstractForward transition rates were originally introduced with the aim to evaluate life insurance liabilities market-consistently. While this idea turned out to have its limitations, recent literature repurposes forward transition rates as a tool for avoiding Markov assumptions in the calculation of life insurance reserves. While life insurance reserves are some form of conditional first-order moments, the calculation of conditional second-order moments needs an extension of the forward transition rate concept from one dimension to two dimensions. Two-dimensional forward transition rates are also needed for the calculation of path-dependent life insurance cash-flows as they occur upon contract modifications. Forward transition rates are designed for doing prospective calculations, and by a time-symmetric definition of so-called backward transition rates one can do retrospective calculations.
Funder
Carl von Ossietzky Universität Oldenburg
Publisher
Springer Science and Business Media LLC
Subject
Statistics, Probability and Uncertainty,Economics and Econometrics,Statistics and Probability