DOI QR코드

DOI QR Code

Pricing an Outside Barrier Equity-Indexed Annuity with Flexible Monitoring Period

배리어 옵션이 내재된 지수연동형 보험상품의 가격결정

  • 신승희 (국민연금연구원) ;
  • 이항석 (성균관대학교 보험계리학과/수학과)
  • Published : 2009.03.30

Abstract

Equity-indexed annuities(EIAs) provide their customers with the greater of either the return linked to the underlying index or the minimum guaranteed return. Insurance companies have developed EIAs to attract customers reluctant to buy traditional fixed annuities because of low returns and also reluctant to buy mutual funds for fear of the high volatility in the stock market. This paper proposes a new type of EIA embedded with an outside barrier option with flexible monitoring period in order to increase its participation rate. It also derives an explicit pricing formula for this proposed product, and discusses numerical examples to show relationships among participation rate, barrier level, index volatility and correlation.

References

  1. Burden, R. L. and Faires, J. D. (2005). Numerical Analysis, Thompson Brooks/Cole
  2. Cho, J. and Lee, H. (2007). Pricing an equity-linked security with non-guaranteed. principal, The Korean Communications in Statistics, 14. 413-429 https://doi.org/10.5351/CKSS.2007.14.2.413
  3. Drezner, Z. (1978). Computation of the bivariate normal integral, Mathematics of Computation, 32, 277-279 https://doi.org/10.2307/2006276
  4. Drezner, Z. (1994), Computation of the trivariate normal integral, Mathematics of Computation, 62, 289-294 https://doi.org/10.2307/2153409
  5. Gerber, H. U. and Shiu, E. S. W. (1994). Options pricing by Esscher transforms, Transactions of the Society of Actuaries, 46, 99-140, 141-191
  6. Gerber, H. U. and Shiu, E. S. W. (1996). Actuarial bridges to dynamic hedging and option pricing, Insur-ance: Mathematics and Economics, 18, 183-218 https://doi.org/10.1016/0167-6687(96)85007-4
  7. Jaimungal, S. (2004). Pricing and hedging equity-indexed annuities with variance-gamma deviates, Work-ing Paper, Department of Statistics, Universiy of Toronto
  8. Lee, H. (2003). Pricing equity-indexed annuities with path-dependent options, Insurance: Mathematics and Economics, 33, 677-690 https://doi.org/10.1016/j.insmatheco.2003.09.006
  9. Lee, H. (2004). A joint distribution of two-dimensional Brownian motion with an application to an outside barrier option, Journal of Korean Statistical Society, 33, 245-254
  10. Streiff, T. F. and Dibiase, C. A. (1999). Equity Indexed Annuities, Dearborn, Chicago
  11. Tiong, S. (2000). Valuing equity-indexed annuities, North American Actuarial Journal, 4, 149-163 https://doi.org/10.1080/10920277.2000.10595945