A bivariate model for evaluating equity-linked policies with surrender option

Angelis, Paolo De; Martire, Antonio Luciano; Russo, Emilio

doi:10.1080/03461238.2014.924433

Cited by 6 publications

(3 citation statements)

References 14 publications

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“…belongs to the set of the representative asset values associated with node (i + 1, j m + 1), V (i + 1, j m + 1, k m +1; l uu ) is already available; otherwise, V (i +1, j m +1, k m +1; l uu ) is computed by linear interpolation as in De Angelis et al (2016). The same happens for all the other quantities involved in equation ( 12).…”

Section: S(i J)mentioning

confidence: 99%

A flexible lattice framework for valuing options on assets paying discrete dividends and variable annuities embedding GMWB riders

Angelis

Marchis

Martire

et al. 2022

Decisions Econ Finan

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In a market where a stochastic interest rate component characterizes asset dynamics, we propose a flexible lattice framework to evaluate and manage options on equities paying discrete dividends and variable annuities presenting some provisions, like a guaranteed minimum withdrawal benefit. The framework is flexible in that it allows to combine financial and demographic risk, to embed in the contract early exercise features, and to choose the dynamics for interest rates and traded assets. A computational problem arises when each dividend (when valuing an option) or withdrawal (when valuing a variable annuity) is paid, because the lattice lacks its recombining structure. The proposed model overcomes this problem associating with each node of the lattice a set of representative values of the underlying asset (when valuing an option) or of the personal subaccount (when valuing a variable annuity) chosen among all the possible ones realized at that node. Extensive numerical experiments confirm the model accuracy and efficiency.

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Section: S(i J)mentioning

confidence: 99%

A flexible lattice framework for valuing options on assets paying discrete dividends and variable annuities embedding GMWB riders

Angelis

Marchis

Martire

et al. 2022

Decisions Econ Finan

Self Cite

View full text Add to dashboard Cite

show abstract

“…For a well-known reference on LSMC see the book by Glasserman (2004) and papers by Glasserman & Yu (2004a, 2004b. As regards life and pension liabilities, see Angelis et al (2014) for the usage of the lattice method to discretize the investment asset and interest rate in participating policies, and Bacinello et al (2011) for valuation of variable annuities with LSMC. For the application of LSMC to value the participating contract and its surrounding options, see Bacinello et al (2010), Li & Szimayer (2014), and Létourneau & Stentoft (2014).…”

Section: Introductionmentioning

confidence: 99%

Time-consistent and market-consistent actuarial valuation of the participating pension contract

Ghalehjooghi

Pelsser

2020

Scandinavian Actuarial Journal

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The regulator in Europe calls for the market-consistent valuation of the insurance liabilities that usually are not (fully) tradable. An example of such liabilities is the participating pension contract that is generally longdated and vulnerable to the medium-time dynamics of the underlying risk drivers. Dealing with these characteristics requires time-consistent pricing. However, the well-known non-linear premium principles, often used as pricing operators, are not time-consistent. Based on this motivation, we study the time-consistent and market-consistent (TCMC) actuarial valuation of the participating pension contracts with hybrid payoff. We use a standard profit-sharing mechanism with guaranteed interest rate, and generalize it to a hybrid profit-sharing mechanism with the actuarial and hedgeable financial risks, over the course of the contract. Market-consistency is maintained by "two-step actuarial valuation" in a one-period setting. Time-consistency is obtained by a "backward iteration" of these one-period two-step valuations over the predetermined sub-intervals of the valuation period. We use the Least-Square Monte-Carlo method to implement the conditional operators in the backward iteration. We compare the results of TCMC price to the expected value of the discounted payoff and measure the relative risk loading and time-consistency risk premium. Besides, we investigate the effect of the stochastic interest rate as compared to the deterministic one.

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“…For a well-known reference on LSMC see the book by Glasserman (2004) and papers by Glasserman and Yu (2004b) and Glasserman and Yu (2004a). As regards life and pension liabilities, see Angelis et al (2014) for use of the lattice method to discretize the investment asset and interest rate in participating policies, and Bacinello et al (2011) for valuation of the variable annuities with LSMC. For the application of LSMC to value the participating contract and its surrounding options, see Bacinello et al (2010), Li and Szimayer (2014), and Létourneau and Stentoft (2014).…”

Section: Pension Valuationmentioning

confidence: 99%

Time-consistent and market-consistent actuarial valuations

Ghalehjooghi

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A bivariate model for evaluating equity-linked policies with surrender option

Cited by 6 publications

References 14 publications

A flexible lattice framework for valuing options on assets paying discrete dividends and variable annuities embedding GMWB riders

A flexible lattice framework for valuing options on assets paying discrete dividends and variable annuities embedding GMWB riders

Time-consistent and market-consistent actuarial valuation of the participating pension contract

Time-consistent and market-consistent actuarial valuations

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