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Pricing a Specific Equity Index Annuity in a Regime-Switching Lévy Model with Jump

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  • Yayun Wang

    (Chongqing University of Posts and Telecommunications)

Abstract

In this paper, we consider an efficient method to price the equity index annuity with return guarantees are two class cliquet-styles, which are popular in the insurance market. In order to describe persistent changes of the economic state in the financial market, we assume that the underlying index return process is a regime-switching Lévy model and the model parameters rely on a continuous-time Markov chain with finite economy states. The complex Fourier series approach was used to give the explicit formulae for the price of equity index annuity. The error analysis proves that the complex Fourier series approach can achieve an exponential convergence rate and the experiment results demonstrate the efficiency and accuracy of this method.

Suggested Citation

  • Yayun Wang, 2023. "Pricing a Specific Equity Index Annuity in a Regime-Switching Lévy Model with Jump," Computational Economics, Springer;Society for Computational Economics, vol. 61(3), pages 1115-1135, March.
    • Handle: RePEc:kap:compec:v:61:y:2023:i:3:d:10.1007_s10614-022-10238-6
    DOI: 10.1007/s10614-022-10238-6
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    References listed on IDEAS

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