Study On Life Insurance Pricing Under The Environment Of Stochastic Interest Rate To Defuse Interest Rate Risk Of Life Insurance

Usually the actuarial theory is based on a fix interest rate with a purpose to simplify calculations. However, since the life insurance is a long-term economic action, the factors of government policy and economic cycles may cause the interest rate to be uncertain during the time of insurance. A contradiction between the long-term life insurance price determination and the short-term interest estimation come into being.Take sustainable development trend of life insurance and complicated and volatile economic environment both at home and abroad into consideration, above all, revelation on the interest rate marketing reform in China and the determination of the government control economical operation through the policy of interest rates, will be confronted with serious and immediate problem of life insurance. Our country is usually from the macro point to avoid the interest rate risk of life insurance products in China, that is, to control and prevent the risk based on assets-debts management using financial re-insurance, investing management, and products innovation.On the basis of the predecessors, this paper studies the influence of interest rate in life insurers. According to the general theory of the actuarial pricing theory in life insurance, this paper discusses important effect of life insurance risk management to pricing, then researches on the trend of interest rate wave motion and influence of interest rate on life insurers in China. This paper presents the valuation of future yield put option under a stochastic interest rate of Wiener process model to build a life insurance price determination model. Reviewing differences of the pricing models on fixed-interest and stochastic-interest shows actions of stochastic interest rate pricing guards against and defuse interest rate risks in life insurance.The main analytical method and theory tool below:1) This paper takes method which combines the quantitative and qualitative analyses to research the life insurance model under interest rates fluctuate. The author discusses important effect of life insurance risk management to pricing and researches influence of interest rate on life insurers in theory. Based on changes of the premium and life insurance liabilities under different interest rates, this paper fully describes interest rate risk of Life Insurance Company.2) The primary model in the research is a stochastic interest rate models. Thesis on the analysis of fluctuations in interest rates is not only to analyze its impact on the life insurance pricing, but to illustrate the stochastic interest rate model interest rate volatility associated with the level of function. The basis of the stochastic interest rate model, the address the impact of interest rate volatility.3) The idea of comparative analysis of the problem. Used to describe the importance of comparison with the comparison to illustrate the advantages and disadvantages. Full pricing of life insurance policies compared the importance of three elements, to illustrate the core pricing rates; comparison between the different interest rate level of premium and the size of the reserve, to illustrate the impact of interest rate fluctuations on a major life insurance. Finally we compare the fixed Interest rates;and life insurance under stochastic interest rate model.The unique features and innovations of this paper include:1) At present, our country related interest rate risk research in life insurance, mainly concentrated to the precaution of Interest Spread Risk, In this paper, Interest rate risk in Life Insurance Company was fully analyzed qualitatively and quantitatively.2) Taking pricing as subject matter, this paper try to solve the problern of the long-term life insurance price determination and the short-term interest estimation. This paper presents the valuation of future yield put option under a stochastic interest rate of Wiener process model to build a life insurance price determination model, and shows actions of stochastic interest rate pricing guards against and defuse interest rate risks in life insurance. The management of Interest Rate Risk of Life Insurance Company is not confined to resist risk in passive position.3) This paper put the important of interest rate risk in pricing, the trend of interest rate fluctuation, interest rate risk in Life Insurance Company and the action of stochastic model in life pricing under a uniform frame. That causes the management of interest rate risk in life insurance systematization.