Actuarial Finance

Index

a

• Absolute priority rule 23
• Accumulation phase 159, 167
• Actuarial functions 5
• Actuarial liability 4
• Annuitization phase 159
• Annuity 159
  • Equity-linked annuity 33
• Arbitrage opportunity 40
• Asset
  • Consumption asset 62
  • Definition 4
  • Investment asset 62
  • Value of assets 521
• Asset and liability management (ALM) 33, 519, 521
  • Cash-flow matching 521
  • Definition 6
  • Replication 521

b

• Bid-ask spread 36
• Binary option
  • Asset-or-nothing option 126
  • Binary call option 126
  • Binary put option 126
  • Black-Scholes-Merton model 411
  • Cash-or-nothing option 126
  • Definition 126
• Binomial model 185, 397
  • American option 269
  • Approximation of the Black-Scholes formula 405
  • Approximation of the Black-Scholes-Merton model 398
  • Continuation value 270
  • Cox-Ross-Rubinstein (CRR) model 243, 405
  • Currency option 280
  • Discrete (dollar) dividend 228
  • Dividend-paying risky asset 276
  • Dynamic trading strategy 212, 250
  • Guaranteed minimum withdrawal benefit (GMWB) 232
  • Holding value 270
  • Investment guarantee 194
  • Jarrow-Rudd (JR) model 243, 402
  • Market completeness 192, 218, 253, 417
  • Multi-period model 239
  • No-arbitrage condition 187, 205, 207, 241
  • One-period model 185
  • Portfolio value process 251
  • Rebalancing 212
  • Recombining tree 204, 241
  • Replicating portfolio 190, 213
  • Risk-neutral pricing formula 196, 221, 260
  • Risk-neutral probability 196, 220, 260
  • Self-financing strategy 215, 252
  • Static trading strategy 212, 250
  • Stochastic interest rate 225
  • Trading strategy 190, 250
  • Two-period model 201
• Black-Scholes formula 403, 450, 455