Sensitivity Analysis of Thiele^s Differential Equation Ferdinand Laurencius Yonathan, Marcus Wono Setya Budhi, Dila Puspita
Faculty of Mathematics and Natural Science, Bandung Institute of Technology
Abstract
In this paper, we will conduct sensitivity analysis on dual-state Thiele^s differential equation, which specifies the continuous evolution of insurance policy values over time. Analysis is focused on the impacts of expenses, sum assured and interest rate amounts. Force of mortality is determined using an estimation to the Indonesian Mortality Table IV, which is based on Gompertz^s Law. Annual rate of premium will be calculated using the equivalence premium principle. Force of interest is based on the stochastic CIR^s short-rate model, of which the market price of risk parameter is varied.
Keywords: Thiele^s differential equation, policy value, CIR, premium, sum assured
