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Pricing and Hedging Variable Annuities

In: Mathematical and Statistical Methods for Actuarial Sciences and Finance

Author

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  • Abdou Kélani

    (EMLYON Business School, CEFRA)

  • François Quittard-Pinon

    (EMLYON Business School, CEFRA)

Abstract

The aim of this paper is to present a general method to value, hedge and assess risk for a subclass of VA contracts in a Lévy market. This subclass contains Guaranteed Minimum Maturity Benefit (GMMB), Guaranteed Minimum Death Benefit (GMDB), and Guaranteed Minimum Accumulation Benefit (GMAB) that has a cliquet-style option in its design. The suggested unifying method is based on the generalized Fourier transform and gives general quasi-closed form solutions for a large class of Lévy processes. A numerical analysis that uses a Kou process illustrates the whole procedure.

Suggested Citation

  • Abdou Kélani & François Quittard-Pinon, 2014. "Pricing and Hedging Variable Annuities," Springer Books, in: Cira Perna & Marilena Sibillo (ed.), Mathematical and Statistical Methods for Actuarial Sciences and Finance, edition 127, pages 121-124, Springer.
    • Handle: RePEc:spr:sprchp:978-3-319-05014-0_28
    DOI: 10.1007/978-3-319-05014-0_28
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