Continuous affine processes: Transformations, Markov chains and life insurance

TY - JOUR

T1 - Continuous affine processes

T2 - Transformations, Markov chains and life insurance

AU - Buchardt, Kristian

PY - 2016/6/1

Y1 - 2016/6/1

N2 - Affine processes possess the property that expectations of exponential affine transformations are given by a set of Riccati differential equations, which is the main feature of this popular class of processes. In this paper we generalise these results for expectations of more general transformations. This is of interest in, e.g. doubly stochastic Markov models, in particular in life insurance. When using affine processes for modelling the transition rates and interest rate, the results presented allow for easy calculation of transition probabilities and expected present values.

AB - Affine processes possess the property that expectations of exponential affine transformations are given by a set of Riccati differential equations, which is the main feature of this popular class of processes. In this paper we generalise these results for expectations of more general transformations. This is of interest in, e.g. doubly stochastic Markov models, in particular in life insurance. When using affine processes for modelling the transition rates and interest rate, the results presented allow for easy calculation of transition probabilities and expected present values.

KW - Credit risk

KW - Doubly stochastic process

KW - Multi-state life insurance models

KW - Stochastic interest

KW - Stochastic mortality

UR - http://www.scopus.com/inward/record.url?scp=84976448998&partnerID=8YFLogxK

U2 - 10.1017/apr.2016.8

DO - 10.1017/apr.2016.8

M3 - Journal article

AN - SCOPUS:84976448998

SN - 0001-8678

VL - 48

SP - 423

EP - 442

JO - Advances in Applied Probability

JF - Advances in Applied Probability

IS - 2

ER -