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Article: Optimal surrender strategies for equity-indexed annuity investors with partial information

TitleOptimal surrender strategies for equity-indexed annuity investors with partial information
Authors
KeywordsEquity-Indexed Annuity
Logarithmic Utility
Optimal Stopping
Partial Information
Regime Switching
Issue Date2012
PublisherElsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/stapro
Citation
Statistics And Probability Letters, 2012, v. 82 n. 7, p. 1251-1258 How to Cite?
Abstract
In this paper we consider an equity-indexed annuity (EIA) investor who wants to determine when he should surrender the EIA in order to maximize his logarithmic utility of the wealth at surrender time. We model the dynamics of the index using a geometric Brownian motion with regime switching. To be more realistic, we consider a finite time horizon and assume that the Markov chain is unobservable. This leads to the optimal stopping problem with partial information. We give a representation of the value function and an integral equation satisfied by the boundary. In the Bayesian case which is a special case of our model, we obtain analytical results for the value function and the boundary. © 2012 Elsevier B.V.
Persistent Identifierhttp://hdl.handle.net/10722/172496
ISSN
2013 Impact Factor: 0.531
2013 SCImago Journal Rankings: 0.771
ISI Accession Number ID
References

 

Author Affiliations
  1. Shandong University
  2. The University of Hong Kong
  3. East China Normal University
DC FieldValueLanguage
dc.contributor.authorWei, Jen_US
dc.contributor.authorWang, Ren_US
dc.contributor.authorYang, Hen_US
dc.date.accessioned2012-10-30T06:22:48Z-
dc.date.available2012-10-30T06:22:48Z-
dc.date.issued2012en_US
dc.identifier.citationStatistics And Probability Letters, 2012, v. 82 n. 7, p. 1251-1258en_US
dc.identifier.issn0167-7152en_US
dc.identifier.urihttp://hdl.handle.net/10722/172496-
dc.description.abstractIn this paper we consider an equity-indexed annuity (EIA) investor who wants to determine when he should surrender the EIA in order to maximize his logarithmic utility of the wealth at surrender time. We model the dynamics of the index using a geometric Brownian motion with regime switching. To be more realistic, we consider a finite time horizon and assume that the Markov chain is unobservable. This leads to the optimal stopping problem with partial information. We give a representation of the value function and an integral equation satisfied by the boundary. In the Bayesian case which is a special case of our model, we obtain analytical results for the value function and the boundary. © 2012 Elsevier B.V.en_US
dc.languageengen_US
dc.publisherElsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/staproen_US
dc.relation.ispartofStatistics and Probability Lettersen_US
dc.rightsNOTICE: this is the author’s version of a work that was accepted for publication in Statistics and Probability Letters. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Statistics and Probability Letters, 2012, v. 82 n. 7, p. 1251-1258. DOI: 10.1016/j.spl.2012.03.021-
dc.rightsCreative Commons: Attribution 3.0 Hong Kong License-
dc.subjectEquity-Indexed Annuityen_US
dc.subjectLogarithmic Utilityen_US
dc.subjectOptimal Stoppingen_US
dc.subjectPartial Informationen_US
dc.subjectRegime Switchingen_US
dc.titleOptimal surrender strategies for equity-indexed annuity investors with partial informationen_US
dc.typeArticleen_US
dc.identifier.emailYang, H: hlyang@hku.hken_US
dc.identifier.authorityYang, H=rp00826en_US
dc.description.naturepostprinten_US
dc.identifier.doi10.1016/j.spl.2012.03.021en_US
dc.identifier.scopuseid_2-s2.0-84860120722en_US
dc.identifier.hkuros218766-
dc.relation.referenceshttp://www.scopus.com/mlt/select.url?eid=2-s2.0-84860120722&selection=ref&src=s&origin=recordpageen_US
dc.identifier.volume82en_US
dc.identifier.issue7en_US
dc.identifier.spage1251en_US
dc.identifier.epage1258en_US
dc.identifier.isiWOS:000305493300006-
dc.publisher.placeNetherlandsen_US
dc.identifier.scopusauthoridWei, J=24438631900en_US
dc.identifier.scopusauthoridWang, R=7405334582en_US
dc.identifier.scopusauthoridYang, H=7406559537en_US
dc.identifier.citeulike10492028-

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