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Article: Valuing Equity-Linked Death Benefits in a Regime-Switching Framework

TitleValuing Equity-Linked Death Benefits in a Regime-Switching Framework
Authors
Issue Date2015
PublisherAstin Bulletin. The Journal's web site is located at http://poj.peeters-leuven.be/content.php?url=journal&journal_code=AST
Citation
ASTIN Bulletin, 2015, v. 45, p. 355-395 How to Cite?
AbstractIn this article, we consider the problem of computing the expected discounted value of a death benefit, e.g. in Gerber et al. (2012, 2013), in a regime-switching economy. Contrary to their proposed discounted density approach, we adopt the Laplace transform to value the contingent options. By this alternative approach, closed-form expressions for the Laplace transforms of the values of various contingent options, such as call/put options, lookback options, barrier options, dynamic fund protection and the dynamic withdrawal benefits, have been obtained. The value of each contingent option can then be recovered by the numerical Laplace inversion algorithm, and this efficient approach is documented by several numerical illustrations. The strength of our methodology becomes apparent when we tackle the valuations of exotic contingent options in the cases when (1) the contracts have a finite expiry date; (2) when the time-until-death variable is uniformly distributed in accordance with De Moivre's law.
Persistent Identifierhttp://hdl.handle.net/10722/214574

 

DC FieldValueLanguage
dc.contributor.authorSiu, CC-
dc.contributor.authorYam, SCP-
dc.contributor.authorYang, H-
dc.date.accessioned2015-08-21T11:38:45Z-
dc.date.available2015-08-21T11:38:45Z-
dc.date.issued2015-
dc.identifier.citationASTIN Bulletin, 2015, v. 45, p. 355-395-
dc.identifier.urihttp://hdl.handle.net/10722/214574-
dc.description.abstractIn this article, we consider the problem of computing the expected discounted value of a death benefit, e.g. in Gerber et al. (2012, 2013), in a regime-switching economy. Contrary to their proposed discounted density approach, we adopt the Laplace transform to value the contingent options. By this alternative approach, closed-form expressions for the Laplace transforms of the values of various contingent options, such as call/put options, lookback options, barrier options, dynamic fund protection and the dynamic withdrawal benefits, have been obtained. The value of each contingent option can then be recovered by the numerical Laplace inversion algorithm, and this efficient approach is documented by several numerical illustrations. The strength of our methodology becomes apparent when we tackle the valuations of exotic contingent options in the cases when (1) the contracts have a finite expiry date; (2) when the time-until-death variable is uniformly distributed in accordance with De Moivre's law.-
dc.languageeng-
dc.publisherAstin Bulletin. The Journal's web site is located at http://poj.peeters-leuven.be/content.php?url=journal&journal_code=AST-
dc.relation.ispartofASTIN Bulletin-
dc.rightsCreative Commons: Attribution 3.0 Hong Kong License-
dc.titleValuing Equity-Linked Death Benefits in a Regime-Switching Framework-
dc.typeArticle-
dc.identifier.emailYang, H: hlyang@hku.hk-
dc.identifier.authorityYang, H=rp00826-
dc.description.naturepublished_or_final_version-
dc.identifier.doi10.1017/asb.2014.32-
dc.identifier.hkuros248426-
dc.identifier.volume45-
dc.identifier.spage355-
dc.identifier.epage395-

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