In this paper, we examine the valuations of equity-indexed annuities (EIAs) when their reference stocks distribute stochastic dividends. Due to fact that typically pay dividends at discrete times after payment dates are announced, pricing EIAs with is deemed be practically significant. We directly model dividend payments using jump diffusion process regime switching, and then determine dynamics...

Prior studies of life annuities that use classical dynamic programming methods to solve for annuity decisions find large gains from annuitization. The fact that few people actually buy annuities leads to an “annuity puzzle.” An alternative method of analysis, which uses concepts from approximate dynamic programming and samples of life histories from a pension simulation model, is shown to produ...