Pricing Ratchet Equity-Indexed Annuities with Early Surrender Risk in a CIR++ Model |
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Authors: | Xiao Wei Marcellino Gaudenzi Antonino Zanette |
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Affiliation: | 1. China Institute for Actuarial Science , Central University of Finance and Economics , Beijing , China;2. Dipartimento di Scienze Economiche e Statistiche , Università di Udine , Udine , Italy |
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Abstract: | In this article we propose a lattice algorithm for pricing simple Ratchet equity-indexed annuities (EIAs) with early surrender risk and global minimum contract value when the asset value depends on the CIR++ stochastic interest rates. In addition we present an asymptotic expansion technique that permits us to obtain a first-order approximation formula for the price of simple Ratchet EIAs without early surrender risk and without a global minimum contract value. Numerical comparisons show the reliability of the proposed methods. |
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