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Dynamic Valuation of Wrongful Death Compensation when the Growth Rate of the Wage Follows Vasicek Model
Keywords
Wrongful death, Growth of the wage, Interest rate, multi-Vasicek model, Compensation
Abstract
In this article, dynamic valuation of wrongful death compensation with single and annual level payment are discussed. The annual growth rate of the wage and the risk-free interest rate are assumed to follow multi-Vasicek model. The formula of calculating time-varying correlation coefficient between the wage and the discounting rate are deducted. Empirical data from U.S, and China shows that multi-Vasicek model is a good model to be fitted to display the change patterns of the annual growth of the wage and risk-free interest rate.
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