Randomization and the valuation of guaranteed minimum death benefits
Griselda Deelstra and
Peter Hieber
European Journal of Operational Research, 2023, vol. 309, issue 3, 1218-1236
Abstract:
In this article, we focus on death-linked contingent claims (GMDBs) paying a random financial return at a random time of death in the general case where financial returns follow a regime switching model with two-sided phase-type jumps. We approximate the distribution of the remaining lifetime by either a series of Erlang distributions or a Laguerre series expansion, whose capability to fit the tail of the observed mortality data turns out to be much better than the commonly used series of exponential distributions.
Keywords: Risk analysis; Variable annuities; Erlangization; Regime switching; Phase-type distributions (search for similar items in EconPapers)
JEL-codes: G11 G22 G23 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:309:y:2023:i:3:p:1218-1236
DOI: 10.1016/j.ejor.2023.01.059
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