Comonotonic Approximations of Risk Measures for Variable Annuity Guaranteed Benefits with Dynamic Policyholder Behavior

Runhuan Feng, Xiaochen Jing and Jan Dhaene
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Runhuan Feng: University of Illinois at Urbana-Champaign, United States
Xiaochen Jing: University of Illinois at Urbana-Champaign, United States

Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: The computation of various risk metrics is essential to the quantitative risk management of variable annuity guaranteed bene ts. The current market practice of Monte Carlo simulation often requires intensive computations, which can be very costly for insurance companies to implement and take so much time that they cannot obtain information and take actions in a timely manner. In an attempt to nd low-cost and ecient alternatives, we explore the techniques of comonotonic bounds to produce closed-form approximation of the risk measures for variable annuity guaranteed bene ts. The techniques are further developed in this paper to address in a systematic way risk measures for death bene ts with the consideration of dynamic policyholder behavior.

Keywords: Variable annuity guaranteed benefit; risk measures; value at risk; conditional tail expectation; geometric Brownian motion; comonotonicity; dynamic policyholder behavior (search for similar items in EconPapers)
JEL-codes: C63 G19 (search for similar items in EconPapers)
Date: 2015-01-16
New Economics Papers: this item is included in nep-rmg
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Working Paper: Comonotonic approximations of risk measures for variable annuity guaranteed benefits with dynamic policyholder behavior (2015)
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