Thiele's differential equation based on Markov jump processes with non-countable state space

Coffie, Emmanuel and Duedahl, Sindre and Proske, Frank (2021) Thiele's differential equation based on Markov jump processes with non-countable state space. Working paper. arXiv.org, Ithaca, N.Y..

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    Abstract

    In modern life insurance, Markov processes in continuous time on a finite or at least countable state space have been over the years an important tool for the modelling of the states of an insured. Motivated by applications in disability insurance, we propose in this paper a model for insurance states based on Markov jump processes with more general state spaces. We use this model to derive a new type of Thiele's differential equation which e.g. allows for a consistent calculation of reserves in disability insurance based on two-parameter continuous time rehabilitation rates.