- Approximate Solutions for Indifference Pricing under General Utility Functions
- Number of pages
- Amsterdam: Faculteit Economie en Bedrijfskunde
- Document type
- Working paper
- Faculty of Economics and Business (FEB)
- Amsterdam School of Economics Research Institute (ASE-RI)
- With the aid of Taylor-based approximations, this paper presents results for pricing insurance contracts by using indifference
pricing under general utility functions. We discuss the connection between the resulting "theoretical" indifference prices
and the pricing rule-of-thumb that practitioners use: Best Estimate plus a "Market Value Margin". Furthermore, we compare
our approximations with known analytical results for exponential and power utility.
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