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Pricing ratchet equity index annuity with mortality risk by complex Fourier series method.
- Source :
-
Journal of Computational & Applied Mathematics . Jan2024, Vol. 436, pN.PAG-N.PAG. 1p. - Publication Year :
- 2024
-
Abstract
- In this paper, we consider the pricing of the ratchet equity-indexed annuity with the incorporation of mortality risk by an efficient and accurate method under the general time-changed Lévy processes. The pricing of the contract is a two-dimensional problem: we apply the complex Fourier series method to the log return dimension of the asset and high-order quadrature approximation to the other dimensions. Depending on the subordinating dynamic of the volatility, we use the time-changed Lévy process to model stochastic volatility via the random time change in the Lévy process, which compensates for limitations in the common Lévy process. By combining the recursive algorithm and complex Fourier series method, we obtain the approximate price of the contract. Error analysis proves that the total error can achieve an exponential convergence rate, and numerical examples demonstrate the accuracy and efficiency of the complex Fourier series expansion method. [ABSTRACT FROM AUTHOR]
Details
- Language :
- English
- ISSN :
- 03770427
- Volume :
- 436
- Database :
- Academic Search Index
- Journal :
- Journal of Computational & Applied Mathematics
- Publication Type :
- Academic Journal
- Accession number :
- 171851040
- Full Text :
- https://doi.org/10.1016/j.cam.2023.115414