Bulletin of the
Korean Mathematical Society
BKMS

ISSN(Print) 1015-8634 ISSN(Online) 2234-3016

Article

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Bull. Korean Math. Soc. 2019; 56(5): 1355-1376

Online first article July 23, 2019      Printed September 30, 2019

https://doi.org/10.4134/BKMS.b181196

Copyright © The Korean Mathematical Society.

First passage time under a regime-switching jump-diffusion model and its application in the valuation of participating contracts

Yinghui Dong, Wenxin Lv, Sang Wu

Suzhou University of Science and Technology; Suzhou University of Science and Technology; Suzhou University of Science and Technology

Abstract

We investigate the valuation of participating life insurance policies with default risk under a geometric regime-switching jump-diffu\-sion process. We derive explicit formula for the Laplace transform of the price of participating contracts by solving integro-differential system and then price them by inverting Laplace transforms.

Keywords: participating contract, regime switching, jump-diffusion process, Laplace transform

MSC numbers: Primary 91B25, 91G20, 62P20

Supported by: This work was financially supported by the NSF of Jiangsu Province (Grant No. BK20170064), the NNSF of China (Grant No. 11771320), QingLan Project of Jiangsu Province, the scholarship of Jiangsu Overseas Visiting Scholar Program and Suzhou Key
Laboratory for Big Data and Information Service (SZS201813)