The time of deducting fees for variable annuities under the state-dependent fee structure

Jiang Zhou and Lan Wu

Insurance: Mathematics and Economics, 2015, vol. 61, issue C, 125-134

Abstract: We investigate the total time of deducting fees for variable annuities with state-dependent fee. This fee charging method is studied recently by Bernard et al. (2014) and Delong (2014) in which the fees deducted from the policyholder’s account depend on the account value. However, both of them have not considered the problem of analyzing probabilistic properties of the total time of deducting fees. We approximate the maturity of a general variable annuity contract by combinations of exponential distributions which are (weakly) dense in the space that is composed of all probability distributions on the positive axis. Working under general jump diffusion process, we derive analytic formulas for the expectation of the time of deducting fees as well as its Laplace transform.

Keywords: Variable annuities; State-dependent fee; Hyper-exponential jump diffusion process; Laplace transform; Refracted Lévy process (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:insuma:v:61:y:2015:i:c:p:125-134

DOI: 10.1016/j.insmatheco.2014.12.008

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