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- Title
Valuation of cliquet-style guarantees with death benefits.
- Authors
Yong, Yaodi; Yang, Hailiang
- Abstract
In this paper, we consider the problem of valuing an equity-linked insurance product with a cliquet-style payoff. The premium is invested in a reference asset whose dynamic is modeled by a geometric Brownian motion. The policy delivers a payment to the beneficiary at either a fixed maturity or the time upon the insured's death, whichever comes first. The residual lifetime of a policyholder is described by a random variable, assumed to be independent of the asset price process, and its distribution is approximated by a linear sum of exponential distributions. Under such characterization, closed-form valuation formulae are derived for the contract considered. Moreover, a discrete-time setting is briefly discussed. Finally, numerical examples are provided to illustrate our proposed approach.
- Subjects
SURVIVORS' benefits; EXPONENTIAL sums; VALUATION; DISTRIBUTION (Probability theory); RANDOM variables; BROWNIAN motion
- Publication
Journal of Industrial & Management Optimization, 2023, Vol 19, Issue 1, p359
- ISSN
1547-5816
- Publication type
Article
- DOI
10.3934/jimo.2021188