Abstract
In Chapter 2 we define a mathematically consistent model for calculating time values of insurance liability cash flows. The key objects are so-called deflators which play the role of stochastic discount factors. Our definition (via deflators) leads in a natural way to market-consistent values which are consistent with the usual financial theory that involves risk neutral valuation. Typically, in financial mathematics the pricing formulas are based on equivalent martingale measures, economists use the notion of state price density processes and actuaries use the terminology of deflators under the real world probability measure. In Chapter 2 we describe these concepts and we give explicit examples.
Access provided by Autonomous University of Puebla. Download to read the full chapter text
Chapter PDF
Keywords
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
Copyright information
© 2010 Springer-Verlag Berlin Heidelberg
About this chapter
Cite this chapter
Wüthrich, M.V., Bühlmann, H., Furrer, H. (2010). Stochastic discounting. In: Market-Consistent Actuarial Valuation. EAA Series. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-14852-1_2
Download citation
DOI: https://doi.org/10.1007/978-3-642-14852-1_2
Publisher Name: Springer, Berlin, Heidelberg
Print ISBN: 978-3-642-14851-4
Online ISBN: 978-3-642-14852-1
eBook Packages: Mathematics and StatisticsMathematics and Statistics (R0)