The use of the option pricing model to determine the actuarially fair premium is difficult to apply in practice because the asset values and risks are difficult to determine.

Question

Quizplus · Accepted Answer

The statement is true. The option pricing model requires accurate estimates of asset values and risks, which can be difficult to determine in practice, leading to challenges in applying the model to determine actuarially fair premiums.

The Use of the Option Pricing Model to Determine the Actuarially