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Valuation of equity-indexed annuities with stochastic interest rate and jump diffusion. (English) Zbl 1297.91140
Summary: This article considers the pricing of equity-indexed annuity (EIA). By employing the change of measure technique, we derive the closed-form solutions for the prices of both point-to-point and annual reset equity-indexed annuities. We also provide numerical results to illustrate the method and computational efficiency of our simulation scheme and the effects of various model parameters on the participation rate.
MSC:
91G30 Interest rates, asset pricing, etc. (stochastic models)
91G60 Numerical methods (including Monte Carlo methods)
62P05 Applications of statistics to actuarial sciences and financial mathematics
60J70 Applications of Brownian motions and diffusion theory (population genetics, absorption problems, etc.)
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