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Application of data clustering and machine learning in variable annuity valuation

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  • Gan, Guojun

Abstract

The valuation of variable annuity guarantees has been studied extensively in the past four decades. However, almost all the studies focus on the valuation of guarantees embedded in a single variable annuity contract. How to efficiently price the guarantees for a large portfolio of variable annuity contracts has not received enough attention. This paper fills the gap by introducing a novel method based on data clustering and machine learning to price the guarantees for a large portfolio of variable annuity contracts. Our test results show that this method performs very well in terms of accuracy and speed.

Suggested Citation

  • Gan, Guojun, 2013. "Application of data clustering and machine learning in variable annuity valuation," Insurance: Mathematics and Economics, Elsevier, vol. 53(3), pages 795-801.
    • Handle: RePEc:eee:insuma:v:53:y:2013:i:3:p:795-801
    DOI: 10.1016/j.insmatheco.2013.09.021
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