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Hsiao-Yin Chang
Former Member
Title
M. A.
Last Name
Chang
First name
Hsiao-Yin
Phone
+41 71 224 7946
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Item type:Publication, Should I stay or go? Valuation of multiple premium payment options for participating life insurance contractsParticipating life insurance contracts with investment guarantees typically possess various embedded options. In this paper, we focus on common options with early exercise features, i.e., paid-up options, resumption options, surrender options and the combinations among them. The valuation of these options depends strongly on the exercise strategy applied by the policyholder. We extend the Least Square Monte Carlo (LSMC) method to approximate an optimal exercise strategy and to determine multiple optimal exercise points while incorporating two stochastic sources (asset and interest rate risk). In addition, these findings are compared to results based on two other exercise assumptions. In contrast to earlier studies on this topic, we show in our model setup that premium-payment options can pose a severe risk for life insurers if not priced properly and hence are of great value for policyholders if used strategically. Moreover, we demonstrate that introducing fees for exercising premium-payment options only slightly reduces the option price necessary to finance adequate risk management measures.Type:journal articleJournal:Review of Managerial ScienceVolume:19Issue:10 - Some of the metrics are blocked by yourconsent settings
Item type:Publication, Risk attitudes towards on-demand insurance: an experimental studyOn-demand insurance products cover risks for short periods of time via a smartphone or other electronic device. Such insurance contracts give policyholders the freedom to choose when to be insured in a flexible way. On-demand contracts may change the way risk is perceived. Therefore, we conduct an experiment and show that individuals can become exceptionally risk-averse when offered short-term insurance. We show two main reasons for this result: first, the underlying risk is often overestimated by the subjects due to a miscalculation of the loss probabilities. Second, the shorter valuation horizon of on-demand insurance contracts leads to myopic loss aversion.Type:journal articleJournal:The Geneva Papers on Risk and Insurance - Issues and PracticeVolume:50Issue:1 - Some of the metrics are blocked by yourconsent settings
Item type:Publication, Scopus© Citations 7