The Research Of The Model Of Asset Share Pricing Embedded With Random Interest Rate

Asset share pricing is one of the assurance pricing method, and it is popularly applied in assurance company because of its consanguineous relationship with the anticipated profit of the company. In recent years, the application of the asset share pricing has been extended to general insurance company. However, asset share pricing is not so perfect, specially it can not reflect the effect of the random interest on the premium. With the development of the insurance industry and the complication of the economy, some innovative policies have appeared, taking participating insurance and universal life insurance for example. The pricing of these new policies must take the random interest into account. So, how to use asset share pricing method to calculate the premium and then to give express to the relationship between investment and the premium become the impetus to involve the traditional asset share pricing.The paper is based on the principle of the asset share pricing. Firstly, the paper analyses the factors included in the asset share pricing formula and then finds out the advantage and disadvantage of the method. The disadvantage of the asset share pricing method is that it can not reflect the effect of the random factor on the premium. Secondly, in order to make the asset share pricing more perfect and more useful, the paper improves the traditional asset share pricing based on some principle such as investment of insurance and backward stochastic differential equations(BSDEs), and then two inferences are showed in the end of chapter3. According to inference1, we can calculate the asset share next period and make investment strategy at the beginning of the period if the origin asset share and the premium are given, and according to inference2, we can calculate the premium and make investment strategy if we know the he asset share at beginning and the asset share next period. Finally, the paper uses Excel and Matlab to demonstrate the application of the improved asset share pricing, such as its accuracy in premium pricing and its validity to make investment strategy.