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Article: Optimal stopping behavior of equity-linked investment products with regime switching

TitleOptimal stopping behavior of equity-linked investment products with regime switching
Authors
KeywordsEquity-Linked Products
Markov Regime Switching Model
Optimal Surrender Time
Stochastic Orders
Utility Function
Issue Date2005
PublisherElsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/ime
Citation
Insurance: Mathematics and Economics, 2005, v. 37 n. 3, p. 599-614 How to Cite?
AbstractIn recent years, there is a growing interest in equity-linked investment products. The return credited to such product depends on the return of some underlying reference index. A prominent example is the equity-indexed annuities (EIAs). A special feature of many of the equity-linked products is that the holders are entitled the right to surrender the product prior to maturity. In this paper, we will study the optimal surrender time for a equity-linked product in a discrete-time setting. We assume that the market environment will switch among different regimes in a Markovian way, and the return of the reference index will have different distributions in different regimes. Assuming a CRRA preference, we have obtained the optimal surrender policy. Properties of the optimal surrender behavior, in particular the effect of regime switching, are examined. © 2005 Elsevier B.V. All rights reserved.
Persistent Identifierhttp://hdl.handle.net/10722/172417
ISSN
2015 Impact Factor: 1.378
2015 SCImago Journal Rankings: 1.000
ISI Accession Number ID
References

 

DC FieldValueLanguage
dc.contributor.authorCheung, KCen_US
dc.contributor.authorYang, Hen_US
dc.date.accessioned2012-10-30T06:22:24Z-
dc.date.available2012-10-30T06:22:24Z-
dc.date.issued2005en_US
dc.identifier.citationInsurance: Mathematics and Economics, 2005, v. 37 n. 3, p. 599-614en_US
dc.identifier.issn0167-6687en_US
dc.identifier.urihttp://hdl.handle.net/10722/172417-
dc.description.abstractIn recent years, there is a growing interest in equity-linked investment products. The return credited to such product depends on the return of some underlying reference index. A prominent example is the equity-indexed annuities (EIAs). A special feature of many of the equity-linked products is that the holders are entitled the right to surrender the product prior to maturity. In this paper, we will study the optimal surrender time for a equity-linked product in a discrete-time setting. We assume that the market environment will switch among different regimes in a Markovian way, and the return of the reference index will have different distributions in different regimes. Assuming a CRRA preference, we have obtained the optimal surrender policy. Properties of the optimal surrender behavior, in particular the effect of regime switching, are examined. © 2005 Elsevier B.V. All rights reserved.en_US
dc.languageengen_US
dc.publisherElsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/imeen_US
dc.relation.ispartofInsurance: Mathematics and Economicsen_US
dc.subjectEquity-Linked Productsen_US
dc.subjectMarkov Regime Switching Modelen_US
dc.subjectOptimal Surrender Timeen_US
dc.subjectStochastic Ordersen_US
dc.subjectUtility Functionen_US
dc.titleOptimal stopping behavior of equity-linked investment products with regime switchingen_US
dc.typeArticleen_US
dc.identifier.emailCheung, KC: kccg@hku.hken_US
dc.identifier.emailYang, H: hlyang@hku.hken_US
dc.identifier.authorityCheung, KC=rp00677en_US
dc.identifier.authorityYang, H=rp00826en_US
dc.description.naturelink_to_subscribed_fulltexten_US
dc.identifier.doi10.1016/j.insmatheco.2005.06.005en_US
dc.identifier.scopuseid_2-s2.0-29144495786en_US
dc.identifier.hkuros118251-
dc.relation.referenceshttp://www.scopus.com/mlt/select.url?eid=2-s2.0-29144495786&selection=ref&src=s&origin=recordpageen_US
dc.identifier.volume37en_US
dc.identifier.issue3en_US
dc.identifier.spage599en_US
dc.identifier.epage614en_US
dc.identifier.isiWOS:000233950100011-
dc.publisher.placeNetherlandsen_US
dc.identifier.scopusauthoridCheung, KC=10038874000en_US
dc.identifier.scopusauthoridYang, H=7406559537en_US

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