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Valuing Guaranteed Minimum Death Benefits by Cosine Series Expansion

Author

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  • Wenguang Yu

    (School of Insurance, Shandong University of Finance and Economics, Jinan 250014, China)

  • Yaodi Yong

    (College of Mathematics and Statistics, Chongqing University, Chongqing 401331, China)

  • Guofeng Guan

    (School of Insurance, Shandong University of Finance and Economics, Jinan 250014, China)

  • Yujuan Huang

    (School of Science, Shandong Jiaotong University, Jinan 250357, China)

  • Wen Su

    (College of Mathematics and Statistics, Chongqing University, Chongqing 401331, China)

  • Chaoran Cui

    (School of Computer Science & Technology, Shandong University of Finance and Economics, Jinan 250014, China)

Abstract

Recently, the valuation of variable annuity products has become a hot topic in actuarial science. In this paper, we use the Fourier cosine series expansion (COS) method to value the guaranteed minimum death benefit (GMDB) products. We first express the value of GMDB by the discounted density function approach, then we use the COS method to approximate the valuation Equations. When the distribution of the time-until-death random variable is approximated by a combination of exponential distributions and the price of the fund is modeled by an exponential Lévy process, explicit equations for the cosine coefficients are given. Some numerical experiments are also made to illustrate the efficiency of our method.

Suggested Citation

  • Wenguang Yu & Yaodi Yong & Guofeng Guan & Yujuan Huang & Wen Su & Chaoran Cui, 2019. "Valuing Guaranteed Minimum Death Benefits by Cosine Series Expansion," Mathematics, MDPI, vol. 7(9), pages 1-15, September.
    • Handle: RePEc:gam:jmathe:v:7:y:2019:i:9:p:835-:d:265826
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    References listed on IDEAS

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