Arbitrage free life insurance pricing model based on individual equity principle

As regards life insurance product of unit linked types, considering all the insuredpsilas expectant unit linked type products. Then no matter what their theories return and insurerpsilas expectant solvency can gravely affect to design the premium and its frame, the corresponding works is done in this research. The ideology sense of individual equity principle is assimilated, and the decision objectives are put up according to the expectant investment return from both sides of the insured and insurer. To set up the arbitrage free life insurance pricing model, the backward stochastic differential equation (BSDE) is selected, meanwhile the capacity on bearing risk and the utility attitude are directly connected in decision objective, then using utility function is avoided. Considering the randomness of investing result and using stochastic mathematical method to solve the model, the both sidespsila theoretical and practical pricing formulae are gotten in accordance with the modern finance theory. And, only if the insuredpsilas price is higher than the insurerpsilas the new policy can form, or the premium can be given between both sidepsilas prices. Then, the individual equity condition for successfully pricing is found out. Since the investment decision is according to the stochastic yield target, the dynamic effect that the stochastic yield of investment brought for life insurance pricing is showed better. Moreover, the mutual inductance status coming from insurance market, investment market and operational circumstance of insurance company can be reported more timely. Evidently, this pricing way reflects hedging principium and well conforms to market competition.