Actuarial Present Value

Traditional actuarial functions in the world of insurance include pricing of an insurance product (life, health, or car insurance, pension etc.) and reserving for future benefit payouts to an existing policy-that is, estimating how much of the past premium must be set aside to cover future policy obligations. In both of these endeavors, the calculations involve the concept of Actuarial Present Value (APV).We present an introduction to the concept and also, for two parametric survival models, derive new formulas for the APV for a specific policy at time of issue: a benefit to be paid to at the time of the policy holder's death.