Financial Valuation of Mortality Risk via the Instantaneous Sharpe Ratio: Applications to Pricing Pure Endowments

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dc.creatorMilevsky, Moshe A.
dc.creatorPromislow, S. David
dc.creatorYoung, Virginia R.
dc.date2007-05-09
dc.date.accessioned2026-07-07T12:05:13Z
dc.date.available2026-07-07T12:05:13Z
dc.descriptionWe develop a theory for pricing non-diversifiable mortality risk in an incomplete market. We do this by assuming that the company issuing a mortality-contingent claim requires compensation for this risk in the form of a pre-specified instantaneous Sharpe ratio. We prove that our ensuing valuation formula satisfies a number of desirable properties. For example, we show that it is subadditive in the number of contracts sold. A key result is that if the hazard rate is stochastic, then the risk-adjusted survival probability is greater than the physical survival probability, even as the number of contracts approaches infinity.
dc.descriptionJEL Classification: G13; G22; C60
dc.identifierhttps://arxiv.org/abs/0705.1302
dc.identifierhttp://arxiv.org/abs/0705.1302
dc.identifier.urihttp://salesiana.dossiersoluciones.com/handle/123456789/208320
dc.subjectPricing of Securities
dc.subjectAnalysis of PDEs
dc.subjectOptimization and Control
dc.subject91B30; 91B70
dc.titleFinancial Valuation of Mortality Risk via the Instantaneous Sharpe Ratio: Applications to Pricing Pure Endowments
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