The paper concerns the case of the insured loan based on an amortization schedule at variable interest rates. Basing on the cash flow structure, the aim is to evaluate the mathematical provision of a portfolio in a fair value approach. In this environment, the complexity of a life insurance contract management practically involves the choice of the most suitable mortality table and discounting process; in the paper the tool is treated in a stochastic scenario for interest rates and in random hypotheses for the mortality rates. The amortization schedule used for the loan repayment is considered at variable interest rates, hooked at opportune rate indexes. A numerical application of the model is presented and a comparison between the behaviour of the fair values of the insured loan portfolio reserve in the two cases of an amortization schedule at fixed and at variable interest rates is reported. The fair reserve sensitivity to the changes of the amortization interest rate is studied and showed with illustrations.
The fair value of the insured loan portfolio scheduled at variable interest rates / Coppola, Mariarosaria; D'Amato, V.; Sibillo, M.. - (2006). (Intervento presentato al convegno Metodi matematici e statistici per le assicurazioni e la finanza tenutosi a Università degli studi di Salerno nel 11-13 ottobre 2006).
The fair value of the insured loan portfolio scheduled at variable interest rates
COPPOLA, MARIAROSARIA;
2006
Abstract
The paper concerns the case of the insured loan based on an amortization schedule at variable interest rates. Basing on the cash flow structure, the aim is to evaluate the mathematical provision of a portfolio in a fair value approach. In this environment, the complexity of a life insurance contract management practically involves the choice of the most suitable mortality table and discounting process; in the paper the tool is treated in a stochastic scenario for interest rates and in random hypotheses for the mortality rates. The amortization schedule used for the loan repayment is considered at variable interest rates, hooked at opportune rate indexes. A numerical application of the model is presented and a comparison between the behaviour of the fair values of the insured loan portfolio reserve in the two cases of an amortization schedule at fixed and at variable interest rates is reported. The fair reserve sensitivity to the changes of the amortization interest rate is studied and showed with illustrations.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
