Description
Abstract: The use of a property of the multidimensional normal distribution of the random variables for determining an optimal hedging strategy in the financial market has been demonstrated. Hedging strategy is frequently used in life insurance and is determined by the survival of the insured up to a specific date. Theorem for the n-dimensional joint normal distribution of the random variables such as the age of the insured person was proved that can be useful for determining the initial capital of the hedging strategy, which minimizes the non-payment risk for the contingent claim. A formula based on a 2-dimensional joint normal distribution was also derived to determine the fair premium for an insurance contract with optimal benefit.