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Using the Black-Scholes method for estimating high-cost illness insurance premiums in Colombia

Liliana Chicaíza and David Cabedo
Innovar: Revista de ciencias administrativas y sociales
Vol. 19, No. 33 (Enero-abril de 2009), pp. 119-130
Stable URL: http://www.jstor.org/stable/23741559
Page Count: 12
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Abstract

This article applied the Black-Scholes option valuation formula to calculating high-cost illness reinsurance premiums in the Colombian health system. The coverage pattern used in reinsuring high-cost illnesses was replicated by means of a European call option contract. The option's relevant variables and parameters were adapted to an insurance market context. The premium estimated by the Black-Scholes method fell within the range of premiums estimated by the actuarial method. El articulo hace una aplicación del método de valoración de opciones de Black-Scholes al cálculo de primas de reaseguro de enfermedades de alto costo en el sistema de salud de Colombia. Se replicó el patrón de cobertura utilizado en el reaseguro de enfermedades de alto costo por medio del contrato de una opción call tipo europeo. Las variables y parámetros relevantes de la opción fueron adaptados al contexto del mercado de seguros. La prima estimada por medio de la metodología de Black-Scholes se ubicó dentro del rango estimado por medio del método actuarial. L'article applique la méthode de valorisation d'options de Black-Scholes pour le calcul de primes de réassurance de maladies à coût élevé du système de santé de Colombie. Une opposition a été faite au patron de couverture utilisé pour la réassurance de maladies à coût élevé par le biais du contrat d'une option call de type européen. Les variables et paramètres importants de cette option ont été adaptés au contexte du marché d'assurances. La prime estimée au moyen de la méthodologie de Black-Scholes s'est située dans le rang d'estimation par le biais de la méthode actuaire. O artigo faz uma aplicação do método de valoração de opções de Black-Scholes ao cálculo de prêmios de resseguro de doenças de alto custo no sistema de saúde da Colômbia. Replicou-se o padrão de cobertura utilizado no resseguro de doenças de alto custo através de um contrato de uma opção call tipo europeu. As variáveis e parâmetros relevantes da opção foram adaptados ao contexto do mercado de seguros. O prêmio estimado através da metodologia de Black-Scholes localizou-se dentro do rango estimado através do método atuarial.

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