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Article: Optimal surrender strategies for equity-indexed annuity investors with partial information
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TitleOptimal surrender strategies for equity-indexed annuity investors with partial information
 
AuthorsWei, J3
Wang, R1 3
Yang, H2
 
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
 
CitationStatistics And Probability Letters, 2012, v. 82 n. 7, p. 1251-1258 [How to Cite?]
DOI: http://dx.doi.org/10.1016/j.spl.2012.03.021
 
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.
 
ISSN0167-7152
2012 Impact Factor: 0.531
2012 SCImago Journal Rankings: 0.678
 
DOIhttp://dx.doi.org/10.1016/j.spl.2012.03.021
 
ReferencesReferences in Scopus
 
DC FieldValue
dc.contributor.authorWei, J
 
dc.contributor.authorWang, R
 
dc.contributor.authorYang, H
 
dc.date.accessioned2012-10-30T06:22:48Z
 
dc.date.available2012-10-30T06:22:48Z
 
dc.date.issued2012
 
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.
 
dc.description.naturepostprint
 
dc.identifier.citationStatistics And Probability Letters, 2012, v. 82 n. 7, p. 1251-1258 [How to Cite?]
DOI: http://dx.doi.org/10.1016/j.spl.2012.03.021
 
dc.identifier.citeulike10492028
 
dc.identifier.doihttp://dx.doi.org/10.1016/j.spl.2012.03.021
 
dc.identifier.epage1258
 
dc.identifier.hkuros218766
 
dc.identifier.issn0167-7152
2012 Impact Factor: 0.531
2012 SCImago Journal Rankings: 0.678
 
dc.identifier.issue7
 
dc.identifier.scopuseid_2-s2.0-84860120722
 
dc.identifier.spage1251
 
dc.identifier.urihttp://hdl.handle.net/10722/172496
 
dc.identifier.volume82
 
dc.languageeng
 
dc.publisherElsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/stapro
 
dc.publisher.placeNetherlands
 
dc.relation.ispartofStatistics and Probability Letters
 
dc.relation.referencesReferences in Scopus
 
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 Annuity
 
dc.subjectLogarithmic Utility
 
dc.subjectOptimal Stopping
 
dc.subjectPartial Information
 
dc.subjectRegime Switching
 
dc.titleOptimal surrender strategies for equity-indexed annuity investors with partial information
 
dc.typeArticle
 
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Author Affiliations
  1. Shandong University
  2. The University of Hong Kong
  3. East China Normal University