Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5076569 | Insurance: Mathematics and Economics | 2014 | 13 Pages |
Abstract
This paper proposes a technique to derive the optimal surrender strategy for a variable annuity (VA) as a function of the underlying fund value. This approach is based on splitting the value of the VA into a European part and an early exercise premium following the work of Kim and Yu (1996) and Carr et al. (1992). The technique is first applied to the simplest VA with GMAB (path-independent benefits) and is then shown to be possibly generalized to the case when benefits are path-dependent. Fees are paid continuously as a fixed percentage of the fund value. Our approach is useful to investigate the impact of path-dependent benefits on surrender incentives.
Keywords
Related Topics
Physical Sciences and Engineering
Mathematics
Statistics and Probability
Authors
Carole Bernard, Anne MacKay, Max Muehlbeyer,