Household Ownership of Variable Annuities

Practical Considerations in Managing Variable Annuities

Variable annuities have grown tremendously in recent years, offering life insurers significant growth opportunities. These equity and interest rate structured products offer a broad range of guarantees to the policyholders, and insurers must manage their risks. The insurer’s risk management program must consider modeling and implementation challenges beyond that of the standard capital market a...

Guaranteed Minimum Withdrawal Benefit in Variable Annuities

We develop a singular stochastic control model for pricing variable annuities with the guaranteed minimum withdrawal benefit. This benefit promises to return the entire initial investment, with withdrawals spread over the term of the contract, irrespective of the market performance of the underlying asset portfolio. A contractual withdrawal rate is set and no penalty is imposed when the policyh...

A Note on the Delta-Hedging Strategy for Variable Annuities

For variable annuities, the cost of hedging must be taken into consideration when firms use the dynamic hedging strategy. In this paper, we study hedging strategies by assuming the hedge position follows a random walk with boundary conditions. We find that re-balancing delta to the initial position is always more cost-efficient than re-balancing it to the edge for a fixed transaction cost. Howe...

securitization of mortality risks in life annuities

insurers have in the past few decades faced longevity risks - the risk that annuitants survive more than expected - and therefore need a new approach to manage this new risk. in this dissertation we survey methods that hedge longevity risks. these methods use securitization to manage risk, so using modern financial and insurance pricing models, especially wang transform and actuarial concepts, ...

Estimating Household Permanent Income from Ownership of Physical Assets