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                                                          Seminar
              Department of Systems Engineering and Engineering Management
                                   The Chinese University of Hong Kong

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Title        : Pricing Participating Products Under a Generalized Jump-

Diffusion with a Markov-switching Compensator

Speaker   : Prof. Ken Tak-kuen Siu
                  Department of Actuarial Maths & Statistics

                  Heriot-Watt University, UK

Date         : January 10th, 2007 (Wednesday)
Time        : 1:30 p.m. - 2:30 p.m.
Venue      : Room 513
                  MMW Engineering Building(Engineering Building Complex Phase 2)
                  CUHK

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Abstract:

We propose a model for valuing participating life insurance products under
a generalized jump-diffusion model with Markov-switching compensator. We
suppose that the jump component is specified by the class of Markov-
modulated kernel-biased completely random measures, which provides a great
deal of flexibility in modeling different types of finite and infinite jump
activities. We also provide additional flexibility to incorporate the impact
of structural changes in macro-economic conditions and business cycles on
the valuation of participating policies by introducing a continuous-time
hidden Markov chain. In particular, we assume that the market interest
rates, the drift, the volatility and the compensator of the reference asset
switch over time according to the state of the hidden Markov chain. We
employ the Esscher transform to determine an equivalent martingale measure
under the incomplete market setting. We shall conduct simulation
experiments to compare the fair values of participating products implied by
our model with those obtained from other existing models in the literature
and highlight some features that can be obtained from our model.

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Biography:

Tak Kuen Siu is a lecturer in actuarial mathematics in the Department of
Actuarial Mathematics and Statistics at Heriot-Watt University, in which he
teaches courses in life-insurance mathematics and financial mathematics.
His research interests are mathematical finance and actuarial science with
specification in risk measurement and management, pricing derivatives and
modern insurance products, regime-switching models in finance and insurance,
credit risk models, credibility and financial time series analysis. He has
published research papers in international refereed academic and professional
journals in actuarial science and mathematical finance, including ASTIN
Bulletin, Insurance: Mathematics and Economics, North American Actuarial
Journal, Quantitative Finance, Risk. He received his BSc (first class honor)
degree in mathematics from the Hong Kong University of Science and Technology
in 1998 and his PhD in statistics and actuarial science from University of
Hong Kong in 2001.

************************* ALL ARE WELCOME ************************

Host        : Professor Li, Duan
Tel           : (852) 2609-8323
Email       : dli@se.cuhk.edu.hk

Enquiries  : Bolin Ding or Jeffrey Xu Yu,
                  Department of Systems Engineering and Engineering Management
                 CUHK
Website   : http://www.se.cuhk.edu.hk/~seg5810
Email       : seg5810@se.cuhk.edu.hk

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