An Analysis of Stock Index Linked Variable Life Insurance with Different Currency Units

• Main Authors: Shu-Ling Lee, 李淑玲
• Other Authors: Richard Lu
• Format: Others
• Language: zh-TW
• Published: 2005
• Online Access: http://ndltd.ncl.edu.tw/handle/53304532134666877477

碩士 === 逢甲大學 === 經營管理碩士在職專班 === 93 === This study analyzes the fair interest crediting structures of index-linked life insurance products where two currencies are involved. For these products, the underlying index is usually a foreign stock market index and the interest credited is made in a domestic currency or the other country’s currency. With a minimum guaranteed return, those life insurance products can be valued under the quanto option pricing framework just as the general option pricing framework in valuing the ordinary index-linked life insurance products with a currency involved. Under the quanto mechanism, it is shown that the fair interest crediting structures of index-linked life insurance products involving two currencies are great different from those involving only one under some circumstances. For instance, if the domestic risk-free interest rate (or the crediting currency) is bigger enough, then the fair participation rate can be over 200 percent with a positive minimum guaranteed return. This high participation rate is not usually for the ordinary indexed-linked life insurance products even considering the cash dividend yield.