Valuing Surrender Options in Korean Interest Indexed Annuities
We present surrender rate models with explanatory variables such as the difference between reference rates and crediting rates, policy age since issue, unemployment rates, and economy growth rates, using a logit model. We calculate the values of the surrender options in Korean interest-indexed annuities. It is interesting to note that the values of the surrender options subject to a surrender charge show negative values despite the fact that the surrender options are the right given to policyholders. We then attempt to find the fair surrender charges for the insurance company and its policyholders.
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Volume (Year): 3 (2009)
Issue (Month): 2 (April)
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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Anna Rita Bacinello, 2003. "Fair Valuation of a Guaranteed Life Insurance Participating Contract Embedding a Surrender Option," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 70(3), pages 461-487.
- Ho, Thomas S Y & Lee, Sang-bin, 1986. " Term Structure Movements and Pricing Interest Rate Contingent Claims," Journal of Finance, American Finance Association, vol. 41(5), pages 1011-1029, December.
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