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by Verde
June 23rd, 2011, 12:38 pm
Forum: General Forum
Topic: Actuarial Pricing vs Financial Mathematics Pricing
Replies: 57
Views: 26526

Actuarial Pricing vs Financial Mathematics Pricing

<t>QuoteOriginally posted by: Edgey@VerdeI don't disagree with your post, but you haven't argued against my point (that the actuarial approach doesn't need independence). Insurance companies do use independence to reduce their costs, but independence is not a required assumption for pricing. Actuari...
by Verde
June 22nd, 2011, 12:42 pm
Forum: General Forum
Topic: Actuarial Pricing vs Financial Mathematics Pricing
Replies: 57
Views: 26526

Actuarial Pricing vs Financial Mathematics Pricing

<t>QuoteOriginally posted by: EdgeyQuoteActuarial pricing only works if the insured events are independent. Independence makes the calculations easier, but dependence can be included into the actuarial approach. QuoteThere is only one S&P500 index, if it crashes 10% every person in the risk pool...
by Verde
June 21st, 2011, 7:18 am
Forum: General Forum
Topic: Actuarial Pricing vs Financial Mathematics Pricing
Replies: 57
Views: 26526

Actuarial Pricing vs Financial Mathematics Pricing

<t>Actuarial pricing only works if the insured events are independent. If I face a 5% probability of death in the next year, an insurer who can pool a large number of lives facing the same probability of death can provide me with insurance worth 20 times my annual premium and break even. If I am inv...
by Verde
June 20th, 2011, 11:00 am
Forum: General Forum
Topic: Actuarial Pricing vs Financial Mathematics Pricing
Replies: 57
Views: 26526

Actuarial Pricing vs Financial Mathematics Pricing

<r><URL url="http://www.soa.org/library/newsletters/risks-and-rewards/1999/march/rrn9903.pdfAn"><LINK_TEXT text="http://www.soa.org/library/newsletters/ ... 9903.pdfAn">http://www.soa.org/library/newsletters/risks-and-rewards/1999/march/rrn9903.pdfAn</LINK_TEXT></URL> Actuary Looks at Financial Insu...
by Verde
May 26th, 2011, 6:51 am
Forum: General Forum
Topic: Merton's portfolio problem - why dying rich?
Replies: 40
Views: 30422

Merton's portfolio problem - why dying rich?

<r>Mike MooreWow, your insight into this problem is remarkable. I only had time to skim your solution. I do not have access to Mathematica, so I will have to try to redo your calculations in Excel and VBA to understand it fully. I am fully in agreement that an exponential probability of survival is ...
by Verde
May 24th, 2011, 2:43 pm
Forum: General Forum
Topic: Merton's portfolio problem - why dying rich?
Replies: 40
Views: 30422

Merton's portfolio problem - why dying rich?

<r>Thanks for that Michael Moore.I will spend some time working through your solution.Are you aware of Milevsky's probability of retirement ruin formula.<URL url="http://www.ifid.ca/pdf_workingpapers/WP2004DEC29.pdfWould"><LINK_TEXT text="http://www.ifid.ca/pdf_workingpapers/WP ... 9.pdfWould">http:...
by Verde
March 31st, 2011, 2:06 pm
Forum: Numerical Methods Forum
Topic: Joint Life expectancy
Replies: 0
Views: 24190

Joint Life expectancy

<t>I use the following excel formula based on the Gompertz law to calculate life expectancy for a single life:=LN(1-1/(EXP((Ap-Mp)/SDp)/LN(0.5)))*SDpWhere:Ap = Age principal life -Assume 65Mp = Mean principal ? Assume 82.1SDp = Standard deviation principal ? Assume 11.4The result is 16.1 yearsIf I a...
by Verde
December 19th, 2009, 6:54 pm
Forum: General Forum
Topic: Calculate implied strike price
Replies: 3
Views: 34469

Calculate implied strike price

Fantastic, exactly what I needed.
by Verde
December 18th, 2009, 12:58 pm
Forum: General Forum
Topic: Calculate implied strike price
Replies: 3
Views: 34469

Calculate implied strike price

<t>If the Call Price, Stock price, SD, Rf rate and Time to exp. for an option are known, is there a closed form solution to calculate the implied Strike price.If not, in using Newton's method to do the calculation is there a formula to calculte the first derivative of the call price with respect to ...
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