Design of a Pure Endowment Life Insurance Contract Based on Optimal Stochastic Control

Abstract

In this paper, we design a pure-endowment insurance contract and obtain the optimal strategy and consumption for a policyholder with CRRA utility function. In this contract, premiums are received from the policyholder at certain times. Theinsurer undertakes to pay the premiums by a certain guarantee rate, in addition, by investing in a portfolio of risky and risk free assets share invest pro ts. We used Variance Gamma process as a representative of in nite activity jump modelsand sensitivity of jump parameters in an uncertainty nancial market has been studied. Also we compared results using by two forces of mortality.

Keywords

• optimal strategy
• force of mortality
• pure-endowment
• infinite activity l' {e}vy model