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Valuation of equity-indexed annuities with regime-switching jump diffusion risk and stochastic mortality risk. (English) Zbl 1274.60215
Summary: This paper extends the model and analysis of S. D. Lin, K. S. Tan and H. Yang [“Pricing annuity guarantees under a regime-switching model”, North Am. Actuar. J. 13, No 3, 316–338 (2009)]. We assume that the financial market follows a regime-switching jump-diffusion model and the mortality satisfies Lévy process. We price the point to point and annual reset EIAs by Esscher transform method under Merton’s assumption and obtain the closed form pricing formulas. Under two cases: with mortality risk and without mortality risk, the effects of the model parameters on the EIAs pricing are illustrated through numerical experiments.

MSC:
60H30 Applications of stochastic analysis (to PDEs, etc.)
60J75 Jump processes (MSC2010)
91B25 Asset pricing models (MSC2010)
91B30 Risk theory, insurance (MSC2010)
91G20 Derivative securities (option pricing, hedging, etc.)
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