Resumen de Using the Black-Scholes method for estimating high-cost illness insurance premiums in Colombia

Liliana Alejandra Chicaíza Becerra, J. David Cabedo Semper

• This article applied the Black-Scholes option valuation formula to calculating high-cost illness reinsurance premiums in the Colombian health system. The coverage pattern used in reinsuring high-cost illnesses was replicated by means of a European call option contract. The option�s relevant variables and parameters were adapted to an insurance market context. The premium estimated by the Black-Scholes method fell within the range of premiums estimated by the actuarial method.