This paper incorporates contagious surrender behavior, a critical risk on life insurance markets, into the valuation and risk management of life insurance policies, allowing for structural default of the insurance company. Our heterogeneous policyholder pool contains a minority of financially...

Reference points influence economic decisions. This paper considers how health reference points and their adaptation to decreasing health influence medical spending, consumption, and investment in a dynamic model. A static reference point implies an aspiration to offset health losses already at...