Approximate Solutions for Indifference Pricing Under General Utility Functions

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.

Netspar, Network for Studies on Pensions, Aging and Retirement, is a thinktank and knowledge network. Netspar is dedicated to promoting a wider understanding of the economic and social implications of pensions, aging and retirement in the Netherlands and Europe.


Mission en strategy           •           Network           •           Organisation           •          Magazine
Netspar Brief            •            Actionplan 2019-2023           •           Researchagenda


Our partners

B20160708_universiteit leiden
BPL_Pensioen_logo+pay-off - 1610-1225 v1.1_grijswaarden
B20220329_sph huisartsen
View all partners