Pricing ratchet equity-indexed annuities with early surrender risk in a CIR\(++\) model. (English) Zbl 1412.91058

Wei, Xiao; Gaudenzi, Marcellino; Zanette, Antonino

N. Am. Actuar. J. 17, No. 3, 229-252 (2013).

Summary: In this article we propose a lattice algorithm for pricing simple ratchet equity-indexed annuities (EIAs) with early surrender risk and global minimum contract value when the asset value depends on the CIR\(++\) stochastic interest rates. In addition we present an asymptotic expansion technique that permits us to obtain a first-order approximation formula for the price of simple ratchet EIAs without early surrender risk and without a global minimum contract value. Numerical comparisons show the reliability of the proposed methods.

MSC:

91B30	Risk theory, insurance (MSC2010)
91G60	Numerical methods (including Monte Carlo methods)
41A60	Asymptotic approximations, asymptotic expansions (steepest descent, etc.)

Keywords:

ratchet equity-indexed annuities; CIR\(++\) stochastic interest rates; asymptotic expansion

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