Please use this identifier to cite or link to this item: http://hdl.handle.net/10077/9607
Title: A Dynamic Programming Algorithm for the Valuation of Guaranteed Minimum Withdrawal Benefits in Variable Annuities
Authors: Bacinello, Anna Rita
Millossovich, Pietro
Montealegre, Alvaro
Keywords: Variable annuitiesGMWBDynamic approachLévy processesPolicyholder’s behaviour 4
Issue Date: 2013
Publisher: EUT Edizioni Università di Trieste
Source: Anna Rita Bacinello, Pietro Millossovich, Alvaro Montealegre, 'A Dynamic Programming Algorithm for the Valuation of Guaranteed Minimum Withdrawal Benefits in Variable Annuities', DEAMS Research Paper Series 2013, N° 4, Trieste, Edizioni Università di Trieste, pp. 24.
Series/Report no.: DEAMS Research Paper Series 
DEAMS Research Paper Series 2013, 4
Abstract: In this paper we present a dynamic programming algorithm for pricing variable annuities with Guaranteed Minimum Withdrawal Benefits (GMWB) under a general Lévy processes framework. The GMWB gives the policyholder the right to make periodical withdrawals from her policy account even when the value of this account is exhausted. Typically, the total amount guaranteed for withdrawals coincides with her initial investment, providing then a protection against downside market risk. At each withdrawal date, the policyholder has to decide whether, and how much, to withdraw, or to surrender the contract. We show how different levels of rationality in the policyholder’s withdrawal behaviour can be modelled. We perform a sensitivity analysis comparing the numerical results obtained for different contractual and market parameters, policyholder behaviours, and different types of Lévy processes.
URI: http://hdl.handle.net/10077/9607
ISBN: 978-88-8303-538-8
Appears in Collections:DEAMS Research Paper Series 2013, 4

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