European and American put options on insurance products

Research output: Contribution to journalArticlepeer-review


We consider a European and American put option defined on pure endowment insurance and risk insurance contracts, respectively. These options give the holder of the option or the beneficiary of said holder the opportunity to exercise the options and earn the difference between the future value of the insurance benefit discounted by a fixed interest rate-the strike price of the option, and the future value of the insurance benefit discounted by the real interest rates which the option writer achieves on the investments through the exercise date. The randomness of the interest rate is modulated by two stochastic processes: the Ornstein-Uhlenbeck (OU) process and the Vasicek process. In each case considered, an explicit expression of the value of the option contract is given, as are numerical examples.

Original languageEnglish
Pages (from-to)48-56
Number of pages9
JournalInvestment Management and Financial Innovations
Issue number2
StatePublished - 1 Jan 2008


  • American put option
  • European put option
  • Exotic option
  • Ornstein-Uhlenbeck process
  • Pure endowment insurance
  • Risk insurance
  • Vasicek process

ASJC Scopus subject areas

  • Business and International Management
  • Accounting
  • Finance
  • Economics and Econometrics
  • Strategy and Management


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