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Quantile hedging for guaranteed minimum death benefits

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  • Wang, Yumin

Abstract

Quantile hedging for contingent claims is an active topic of research in mathematical finance. It plays a role in incomplete markets when perfect hedging is not possible. Guaranteed minimum death benefits (GMDBs) are present in many variable annuity contracts, and act as a form of portfolio insurance. They cannot be perfectly hedged due to the mortality component, except in the limit as the number of contracts becomes infinitely large. In this article, we apply ideas from finance to derive quantile hedges for these products under various assumptions.

Suggested Citation

  • Wang, Yumin, 2009. "Quantile hedging for guaranteed minimum death benefits," Insurance: Mathematics and Economics, Elsevier, vol. 45(3), pages 449-458, December.
    • Handle: RePEc:eee:insuma:v:45:y:2009:i:3:p:449-458
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    References listed on IDEAS

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    Cited by:

    1. Gan, Guojun, 2013. "Application of data clustering and machine learning in variable annuity valuation," Insurance: Mathematics and Economics, Elsevier, vol. 53(3), pages 795-801.
    2. Feng, Runhuan & Volkmer, Hans W., 2012. "Analytical calculation of risk measures for variable annuity guaranteed benefits," Insurance: Mathematics and Economics, Elsevier, vol. 51(3), pages 636-648.
    3. Kirkby, J. Lars & Nguyen, Duy, 2021. "Equity-linked Guaranteed Minimum Death Benefits with dollar cost averaging," Insurance: Mathematics and Economics, Elsevier, vol. 100(C), pages 408-428.
    4. Milevsky, Moshe A., 2020. "Calibrating Gompertz in reverse: What is your longevity-risk-adjusted global age?," Insurance: Mathematics and Economics, Elsevier, vol. 92(C), pages 147-161.
    5. Gao, Quansheng & He, Ting & Zhang, Chi, 2011. "Quantile hedging for equity-linked life insurance contracts in a stochastic interest rate economy," Economic Modelling, Elsevier, vol. 28(1-2), pages 147-156, January.
    6. Gao, Quansheng & He, Ting & Zhang, Chi, 2011. "Quantile hedging for equity-linked life insurance contracts in a stochastic interest rate economy," Economic Modelling, Elsevier, vol. 28(1), pages 147-156.
    7. Eckhard Platen, 2009. "Real World Pricing of Long Term Contracts," Research Paper Series 262, Quantitative Finance Research Centre, University of Technology, Sydney.

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