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Development and Pricing of a New Participating Contract |
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| Authors: | Carole L Bernard PhD Olivier A Le Courtois PhD and Series is an Associate Professor Fran?ois M Quittard-Pinon PhD |
| Institution: | 1. University of Lyon 1 , 255 chemin des Peyrières , 07100 Boulieu les Annonay , France;2. Finance , EM Lyon Graduate School of Management , 23 Avenue Guy de Collongue , 69134 Ecully Cedex , France;3. Finance , University of Lyon 1 , 50 Avenue Tony Garnier , 69007 Lyon , France |
| Abstract: | Abstract This article designs and prices a new type of participating life insurance contract. Participating contracts are popular in the United States and European countries. They present many different covenants and depend on national regulations. In the present article we design a new type of participating contract very similar to the one considered in other studies, but with the guaranteed rate matching the return of a government bond. We prove that this new type of contract can be valued in closed form when interest rates are stochastic and when the company can default. |
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