Enhancing annuities with equity

Pricing and Hedging Equity Indexed Annuities with Variance-Gamma Deviates

The author analyzes the pricing and hedging problem for Equity Indexed Annuities (EIAs) with underlying risky assets following a geometric Variance-Gamma process. This model allows accurate and parsimonious replication of the implied volatility smiles observed in the financial market. I argue that this model produces consistency in pricing and hedging between the financial and insurance markets...

Pricing Equity-Indexed Annuities Embedded with Exotic Options

Pricing Ratchet equity-indexed annuities with early surrender risk in a CIR++ model

In connection with a problem posed by Kijima and Wong [11], we propose a lattice algorithm for pricing simple Ratchet equity-indexed annuities (EIAs) with early surrender risk and global minimum contract value when the asset value depends on the CIR++ stochastic interest rates. In addition we present an asymptotic expansion technique which permits to obtain a first order approximation formula f...

Pricing Options and Equity-Indexed Annuities in a Regime-switching Model by Trinomial Tree Method

In this paper we summarize the main idea and results of Yuen and Yang (2009, 2010a, 2010b) and provide some results on pricing of Parisian options under the Markov regime-switching model (MRSM). The MRSM allows the parameters of the market model depending on a Markovian process, and the model can reflect the information of the market environment which cannot be modeled solely by linear Gaussian...

Hedging Guarantees in Variable Annuities Under Both Equity and Interest Rate Risks

Effective hedging strategies for variable annuities are crucial for insurance companies in preventing potentially large losses. We consider discrete hedging of options embedded in guarantees with ratchet features, under both equity (including jump) risk and interest rate risk. Since discrete hedging and the underlying model considered lead to an incomplete market, we compute hedging strategies ...