In:
Applied Stochastic Models in Business and Industry, Wiley, Vol. 38, No. 6 ( 2022-11), p. 1019-1038
Abstract:
Pricing a variable annuity (VA) is traditionally based on models with standard Brownian motion (BM). The assumption of independent increments in the BM is not always realistic as the price process of the risky assets exhibit a long‐range dependency. To model such assets, a fractional Brownian motion (FBM) with Hurst parameter is an appropriate model. However, due to arbitrage in an FBM model and jumps in stock returns, we consider in this work a mixed FBM (MFBM) model with jumps and evaluate variable annuities with different riders. We analyze the proposed model numerically to see the impact of mortality risk. We perform a comparison between eight stochastic models to obtain the best‐suited mortality model, for a dataset of the US male population. Finally, we obtain the price of VA guarantees using the forecasted values from the fitted mortality model.
Type of Medium:
Online Resource
ISSN:
1524-1904
,
1526-4025
Language:
English
Publisher:
Wiley
Publication Date:
2022
detail.hit.zdb_id:
2002340-6
SSG:
3,2