Open AccessModification of interest rate model based on compound poisson process and brownian motion affected by inflation rate
Author(s) -
Faiqotul Himmah,
Isnani Darti,
Corina Karim
Publication year - 2020
Publication title -
journal of physics. conference series
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.21
H-Index - 85
eISSN - 1742-6596
pISSN - 1742-6588
DOI - 10.1088/1742-6596/1490/1/012047
Subject(s) - rendleman–bartter model , interest rate , short rate model , vasicek model , inflation (cosmology) , econometrics , poisson distribution , economics , brownian motion , life insurance , geometric brownian motion , real interest rate , value (mathematics) , process (computing) , future value , inflation rate , mathematics , actuarial science , statistics , computer science , diffusion process , physics , macroeconomics , theoretical physics , economy , service (business) , operating system
In actuarial science, interest rate model based on compound Poisson process and Brownian motion is proposed to determine actuarial present value. We used inflation rate in interest rate model to obtain the behavioural change of interest rate model under different parameters based on inflation rate data of Bank Indonesia. The interest rate model can be used to determine actuarial present value of term life insurance for discrete life annuities. To confirm the analytical result, some numerical simulations are presented.