Formulating a Stochastic Discounting Model with Actuarial and Risk Management Applications

Abstract

Stochastic discounting models are generally recognized as extremely strong analytical tools for a very wide variety of fundamental areas in the actuarial discipline. The paper is mainly devoted to the formulation, investigation and application in the actuarial discipline of a stochastic discounting model. It is shown that the formulated stochastic discounting model can substantially support the role of proactivity in making insurance decisions.

JEL Classification: C51

Keywords: Stochastic Discounting, Risk Management, Model