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Dynamic Withdrawals and Stochastic Mortality in GLWB Variable Annuities

In: Mathematical and Statistical Methods for Actuarial Sciences and Finance

Author

Listed:
  • Anna Rita Bacinello

    (University of Trieste, Department of Economics, Business, Mathematics and Statistics ‘Bruno de Finetti’)

  • Rosario Maggistro

    (University of Trieste, Department of Economics, Business, Mathematics and Statistics ‘Bruno de Finetti’)

  • Ivan Zoccolan

    (Generali Italia S.p.A)

Abstract

In this paper we propose a discrete time model, based on dynamic programming, to price GLWB variable annuities under the dynamic approach within a stochastic mortality framework. Our set-up is very general and only requires the Markovian property for the mortality intensity and the asset price processes. We also show the validity of the bang-bang condition for the set of discrete withdrawal strategies of the model. This result allows to drastically reduce the computational time needed to search the optimal withdrawal in the backward recursive step of our dynamic algorithm and provides, as a by-product, an interesting contract decomposition.

Suggested Citation

  • Anna Rita Bacinello & Rosario Maggistro & Ivan Zoccolan, 2022. "Dynamic Withdrawals and Stochastic Mortality in GLWB Variable Annuities," Springer Books, in: Marco Corazza & Cira Perna & Claudio Pizzi & Marilena Sibillo (ed.), Mathematical and Statistical Methods for Actuarial Sciences and Finance, pages 38-43, Springer.
    • Handle: RePEc:spr:sprchp:978-3-030-99638-3_7
    DOI: 10.1007/978-3-030-99638-3_7
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