Application Of Backward Stochastic Differential Equation In Insurance Pricing

Backward stochastic differential equation (BSDE) is developed only less than two decades. The development of BSDE is slower than Forward stochastic differential equation, but more and more researchers realize the importance of BSDE. The signification of BSDE is that we have known the result (generally, the result is uncertain), then according to this result, we should calculate current decision-making. Because we should count the insurance price according to the uncertain result of insurance that we have known, so insurance pricing conform to the signification of BSDE. As the kernel of insurance, the insurance pricing became a focus that more people regard.Because of all above, author prices the insurance by using BSDE in this thesis. The thesis has following contents: firstly, based on investment, author gives the insurance pricing model and reinsurance pricing model (Reinsurance pricing model consists of proportion reinsurance pricing model and non-proportion reinsurance pricing model). Then, the pricing formulae are done. Thirdly, the demonstration analysis that contrasts the method in practice and the method in this thesis is given. Finally, author explains the meanings of pricing formulae and the outcomes of demonstration and tables some proposals about insurance industry of our country.The thesis has following innovations: author modifies the errors and supplies the deficiencies of some researchers, including enactment of parameters, the derivation processes of the formulae. Author also analyzes the conditions that insurance price lower than the price in the practice. Than author increase the illustrative demonstration analysis, and the explanation of the meanings of pricing formulae.