Abstract:
This article studies the model of Dothan interest rate used in determining the annual premium endowment life insurance using Makeham law. Dothan interest rate model is a model of the equilibrium interest rate having lognormal distribution and constantly changing from time to time which is expressed with a stochastic differential equation following the model of geometric Brownian motion. The determination of Dothan interest rate model parameter estimation uses MLE (maximum likelihood estimation) then continued with numerical approach using Newton's method
