Surrender and Path-Dependent Guarantees in Variable Annuities: Integral Equation Solutions and Benchmark Methods

Antonio L. Martire (), Emilio Russo () and Alessandro Staino ()
Additional contact information
Antonio L. Martire: University of Rome ‘La Sapienza’, Department of Methods and Models for Economics, Territory and Finance
Emilio Russo: University of Calabria, Department of Economics, Statistics, and Finance
Alessandro Staino: University of Calabria, Department of Economics, Statistics, and Finance

A chapter in Mathematical and Statistical Methods for Actuarial Sciences and Finance, 2022, pp 340-346 from Springer

Abstract: Abstract We investigate the evaluation problem of variable annuities by considering guaranteed minimum maturity benefits with constant or path-dependent guarantees of barrier and lookback type. We propose to solve the non-standard Volterra integral equations associated with the policy valuations through a randomized trapezoidal quadrature rule combined with an interpolation technique. Such a rule improves the convergence rate with respect to the classical trapezoidal quadrature, while the interpolation technique allows us to obtain an efficient algorithm that produces an accurate approximation of the early exercise boundary. The method accuracy is assessed by constructing two benchmarks based on lattice approaches and the least-squares Monte Carlo simulations. In the first case, a novel algorithm for the lookback path-dependent guarantee is obtained thanks to the lattice convergence properties.

Keywords: Variable annuity; Guaranteed minimum maturity/accumulation benefit; Volterra integral equation; Randomized trapezoidal quadrature; Lattice model; Monte Carlo simulation (search for similar items in EconPapers)
Date: 2022
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-030-99638-3_55

Ordering information: This item can be ordered from
http://www.springer.com/9783030996383

DOI: 10.1007/978-3-030-99638-3_55

Access Statistics for this chapter

More chapters in Springer Books from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().