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Robust Hedging of Withdrawal Guarantees (Extended Version)

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  • Andreas Kunz

Abstract

Withdrawal guarantees ensure the periodical deduction of a constant dollar-amount from a fund investment for a fixed number of periods. If the fund depletes before the last withdrawal, the guarantor has to finance the outstanding withdrawals. We derive a robust hedging strategy which leads to closed form solutions for the guarantee value.

Suggested Citation

  • Andreas Kunz, 2012. "Robust Hedging of Withdrawal Guarantees (Extended Version)," Papers 1202.0175, arXiv.org, revised Sep 2012.
    • Handle: RePEc:arx:papers:1202.0175
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    References listed on IDEAS

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    1. Roger W. Lee, 2004. "The Moment Formula For Implied Volatility At Extreme Strikes," Mathematical Finance, Wiley Blackwell, vol. 14(3), pages 469-480, July.
    2. repec:bla:jfinan:v:53:y:1998:i:3:p:1165-1190 is not listed on IDEAS
    3. Breeden, Douglas T & Litzenberger, Robert H, 1978. "Prices of State-contingent Claims Implicit in Option Prices," The Journal of Business, University of Chicago Press, vol. 51(4), pages 621-651, October.
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    Cited by:

    1. Huang, Yao Tung & Kwok, Yue Kuen, 2014. "Analysis of optimal dynamic withdrawal policies in withdrawal guarantee products," Journal of Economic Dynamics and Control, Elsevier, vol. 45(C), pages 19-43.

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