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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
Keywordsequity-linked death benefits
first passage probabilities
guaranteed minimum death benefits
jump-diffusion process
Regime-switching
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
ISSN
2023 Impact Factor: 1.7
2023 SCImago Journal Rankings: 0.979
ISI Accession Number ID

 

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.issn0515-0361-
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.rightsThis work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License. No commercial re-distribution or re-use allowed. Derivative works cannot be distributed. © ASTIN Bulletin 2015. This article has been published in a revised form in ASTIN Bulletin https://doi.org./10.1017/asb.2014.32.-
dc.subjectequity-linked death benefits-
dc.subjectfirst passage probabilities-
dc.subjectguaranteed minimum death benefits-
dc.subjectjump-diffusion process-
dc.subjectRegime-switching-
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.naturepostprint-
dc.identifier.doi10.1017/asb.2014.32-
dc.identifier.scopuseid_2-s2.0-84928759164-
dc.identifier.hkuros248426-
dc.identifier.volume45-
dc.identifier.spage355-
dc.identifier.epage395-
dc.identifier.eissn1783-1350-
dc.identifier.isiWOS:000353595000004-
dc.identifier.issnl0515-0361-

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