Finance Seminar Series (Brown Bag): Hassan Jawaid, Aarhus University

Title: Effective methods for pricing Variable Annuities (GLWBs)

Info about event

Time

Tuesday 1 April 2014,  at 12:00 - 13:00

Location

Fuglesangs Allé 4, 8210 Aarhus V, building 2632(L), room 242

Organizer

Baran Siyahhan

Speaker: Hassan Jawaid, Aarhus University

Title: Effective methods for pricing Variable Annuities (GLWBs)

Abstract: In this paper, we present a general framework for pricing the latest variable annuity type: guaranteed living withdrawal benefits (GLWBs). This type of variable annuity guarantees a minimum annual/periodic withdrawal amount for the rest of policyholder's life and the policyholder has a right to deduct the guarantee minimum amount from the policy's account until the policyholder's maximum age regardless of the policy's account value drops to zero. We have used the `insurer's perspective' approach, stating the net profit that the insurance company will earn after paying the withdrawal benefits to the policyholder when account value has depleted to zero. We have also analyzed the fair insurance fees associated with the GLWBs and the effect of the financial risk. The paper provides a study on the effect of the different sets of financial parameters on GLWB benefits and the fair insurance fee.

Key Words: Variable annuity, fair insurance fee, guaranteed lifetime withdrawal benefits, Ratchet feature, static withdrawals

Organizer: Baran Siyahhan