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Withdrawal Strategy For Guaranteed Lifelong Withdrawal Benefit Option

Author

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  • GABRIELLA PISCOPO

    (Department of Mathematics and Statistics University of Naples Federico II, Italy)

Abstract

In this paper we present a price model for the Guaranteed Lifelong Withdrawal Benefit, an option embedded in Variable Annuity policies, which gives the insured the possibility to withdraw from a fund a guaranteed amount annually, even if the account value has fallen below this amount. We calculate the No-arbitrage price of the contract if policyholders withdraw always the guaranteed amount or they surrender the product when the surrender value exceeds the value of future benefits

Suggested Citation

  • Gabriella Piscopo, 2010. "Withdrawal Strategy For Guaranteed Lifelong Withdrawal Benefit Option," Perspectives of Innovation in Economics and Business (PIEB), Prague Development Center, vol. 5(2), pages 47-49, June.
    • Handle: RePEc:pdc:jrpieb:v:5:y:2010:i:2:p:47-49
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    References listed on IDEAS

    as
    1. Coleman, Thomas F. & Li, Yuying & Patron, Maria-Cristina, 2006. "Hedging guarantees in variable annuities under both equity and interest rate risks," Insurance: Mathematics and Economics, Elsevier, vol. 38(2), pages 215-228, April.
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    Cited by:

    1. Thorsten Moenig & Daniel Bauer, 2016. "Revisiting the Risk-Neutral Approach to Optimal Policyholder Behavior: A Study of Withdrawal Guarantees in Variable Annuities," Review of Finance, European Finance Association, vol. 20(2), pages 759-794.
    2. Forsyth, Peter & Vetzal, Kenneth, 2014. "An optimal stochastic control framework for determining the cost of hedging of variable annuities," Journal of Economic Dynamics and Control, Elsevier, vol. 44(C), pages 29-53.

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    More about this item

    Keywords

    Guaranteed lifelong withdrawal benefit option; static strategy; surrender value; variable annuity.;
    All these keywords.

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies

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