1. Valuation of cliquet-style guarantees with death benefits.
- Author
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Yong, Yaodi and Yang, Hailiang
- Subjects
SURVIVORS' benefits ,EXPONENTIAL sums ,VALUATION ,DISTRIBUTION (Probability theory) ,RANDOM variables ,BROWNIAN motion - Abstract
In this paper, we consider the problem of valuing an equity-linked insurance product with a cliquet-style payoff. The premium is invested in a reference asset whose dynamic is modeled by a geometric Brownian motion. The policy delivers a payment to the beneficiary at either a fixed maturity or the time upon the insured's death, whichever comes first. The residual lifetime of a policyholder is described by a random variable, assumed to be independent of the asset price process, and its distribution is approximated by a linear sum of exponential distributions. Under such characterization, closed-form valuation formulae are derived for the contract considered. Moreover, a discrete-time setting is briefly discussed. Finally, numerical examples are provided to illustrate our proposed approach. [ABSTRACT FROM AUTHOR]
- Published
- 2023
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