Application of data clustering and machine learning in variable annuity valuation

Guojun Gan

Insurance: Mathematics and Economics, 2013, vol. 53, issue 3, 795-801

Abstract: The valuation of variable annuity guarantees has been studied extensively in the past four decades. However, almost all the studies focus on the valuation of guarantees embedded in a single variable annuity contract. How to efficiently price the guarantees for a large portfolio of variable annuity contracts has not received enough attention. This paper fills the gap by introducing a novel method based on data clustering and machine learning to price the guarantees for a large portfolio of variable annuity contracts. Our test results show that this method performs very well in terms of accuracy and speed.

Keywords: Variable annuity; Data clustering; Machine learning; Monte Carlo simulation; Portfolio valuation; Portfolio pricing (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (32)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:insuma:v:53:y:2013:i:3:p:795-801

DOI: 10.1016/j.insmatheco.2013.09.021

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