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An Efficient Monte Carlo Based Approach for the Simulation of Future Annuity Values
BACINELLO, ANNA RITA
MILLOSSOVICH, PIETRO
VIVIANO, FABIO
2021
Abstract
In this paper we propose a methodology for valuing future annuity contracts based on the Least-Squares Monte Carlo approach. We adopt, as first step, a simplified computational framework where just one risk factor is taken into account, and then we extend it introducing other sources of risk. We give a brief description of the valuation procedure and provide some numerical illustrations. Furthermore, to test the efficiency of the proposed methodology, we compare our results with those obtained by applying a straightforward and time-consuming approach based on nested simulations. Finally, we present some possible applications in the context of de-risking strategies for pension plans and in the valuation of guaranteed annuity options.
Series
DEAMS Research Paper Series 2021, 2
Publisher
EUT Edizioni Università di Trieste
Source
Anna Rita Bacinello, Pietro Millossovich, Fabio Viviano, "An Efficient Monte Carlo Based Approach for the Simulation of Future Annuity Values", EUT Edizioni Università di Trieste, 2021
Languages
en