Courses Exchange Display 2018-2019

Course Description To PDF
Course title Life Insurance I
Course code EBC4119
ECTS credits 6,5
Assessment Whole/Half Grades
Period
Period Start End Mon Tue Wed Thu Fri
2 29-10-2018 21-12-2018 X X
Level Advanced
Coordinator Antoon Pelsser
For more information: a.pelsser@maastrichtuniversity.nl
Language of instruction English
Goals
In this course we aim to teach students the basic principles of pricing life-insurance and pension contract and basic principles of measuring value creation on a market-consistent basis (Market-Consistent Embedded Value).

The underlying principle for this course is the notion that the market-consistent value of a life-insurance or pension contract is based on the market-value of the Replicating Portfolio plus an “add-on” for the remaining (unhedgeable) portions of the risk that are not covered by the Replicating Portfolio.
Description
1. Pricing by Replication: Role of the actuary; Basic idea fair value; Bonds; Forward rates; Duration; Inflation.
2. Non-Financial Risks: Non-hedgeable risks; Market value margin; Modelling of mortality; Utility-based pricing.
3. Equity Options: Unit linked insurance; Intro to option theory; Equity derivatives; With-profit policies.
4. Time-Consistent and Market-Consistent Pricing: Pricing financial & insurance risk simultaneously; Two-step pricing operator; Pricing in continuous time; Market-consistent embedded value.
5. Interest Rates: Interest rate swaps; Swaptions; Extrapolating the term-structure of interest rates.
6. Risk Management: Risk measures; Calculation of Value-at-Risk; Economic Capital; Solvency II.
7. Portfolio Replication: Cash flow output; Choosing objective function; Linear regression; Diagnostic statistics.

Study-load and grading :
* Study-load = 6.5 ECTS (= 182 study-hours).
* The course takes 7 weeks, with 4 contact hours every week plus mandatory homework assignments every week.
* Students work in groups of max. 4 students on the homework assignments. Each post-discussion two groups present their solution to the tutorial group, which will then be discussed by the tutorial group.
* Please note that the homework assignments are based on real-life cases. This means that the assignments are relatively unstructured. This also means that there is usually not a unique "correct" solution for the assignment. It is therefore important that students can motivate and defend the choices they have made to obtain their solution. Discussing the pro's and con's of different solutions will be an important aspect of the post-discussion.
* Average grade for all homework-presentations in the post-discussion counts for 50% of final grade. Final written exam counts for 50% of final grade.
Literature
To be announced.
Prerequisites
Bachelor Level Econometrics and Operations Research, including preparatory courses Actuarial Sciences.
Teaching methods PBL / Lecture / Assignment
Assessment methods Participation / Written Exam
Evaluation in previous academic year For the complete evaluation of this course please click "here"
This course belongs to the following programmes / specialisations
Master Econometrics and Operations Research Actuarial Science
Master Econometrics and Operations Research Econometrics & OR Electives
SBE Exchange Master Master Exchange Courses
SBE Non Degree Courses Master Courses