Development of binomial pricing model of shares and bonds for a life insurance company

Authors

DOI:

https://doi.org/10.15587/2312-8372.2017.113280

Keywords:

insurance market, life insurance, savings, Brownian bridge, random process, shares, bonds, binomial model

Abstract

The process of share price formation is studied in the article as well as a random process, and a model is developed that describes a random process that has characteristics close to the Brownian bridge, and realizes a multiplicative model of the bond price evolution with outpaced repayment time and normal value. The definition of a random process of forming a share price through a geometric Brownian bridge is also given.

Since the Ukrainian insurance market is at the initial stage of development, and the country's economy is unstable, insurance companies need practical and reliable tools for calculating and forecasting the expected return on investment activity. And especially urgent for this particular type of activity is the issue of breakeven investment, as insurance companies can’t afford risky investment because of the specifics of their activities.

As a research result, the level of investing in a risk-free asset for an insurance company of a cumulative type is calculated.

Author Biographies

Victoria Dyba, National Technical University of Ukraine «Igor Sikorsky Kyiv Polytechnic Institute», 37, Peremohy ave., Kyiv, Ukraine, 03056

Postgraduate Student

Department of Mathematical Modeling of Economic Systems

Volodymir Kapustian, National Technical University of Ukraine «Igor Sikorsky Kyiv Polytechnic Institute», 37, Peremohy ave., Kyiv, Ukraine, 03056

Doctor of Physical and Mathematical Sciences, Professor, Head of Department

Department of Mathematical Modeling of Economic Systems

References

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Published

2017-09-21

How to Cite

Dyba, V., & Kapustian, V. (2017). Development of binomial pricing model of shares and bonds for a life insurance company. Technology Audit and Production Reserves, 5(4(37), 45–51. https://doi.org/10.15587/2312-8372.2017.113280

Issue

Vol. 5 No. 4(37) (2017): Economics of enterprises

Section

Economic Cybernetics: Original Research

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Copyright (c) 2017 Victoria Dyba, Volodymir Kapustian

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