Pricing Equity-Indexed Annuities under Stochastic Interest Rates Using Copulas
We develop a consistent evaluation approach for equity-linked insurance products under stochastic interest rates. This pricing approach requires that the premium information of standard insurance products is given exogenously. In order to evaluate equity-linked products, we derive three martingale p...
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| Format: | Article |
| Language: | English |
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Wiley
2010-01-01
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| Series: | Journal of Probability and Statistics |
| Online Access: | http://dx.doi.org/10.1155/2010/726389 |
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| _version_ | 1850165723841691648 |
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| author | Patrice Gaillardetz |
| author_facet | Patrice Gaillardetz |
| author_sort | Patrice Gaillardetz |
| collection | DOAJ |
| description | We develop a consistent evaluation approach for equity-linked insurance products under stochastic interest rates. This pricing approach requires that the premium information of standard insurance products is given exogenously. In order to evaluate equity-linked products, we derive three martingale probability measures that reproduce the information from standard insurance products, interest rates, and equity index. These risk adjusted martingale probability measures are determined using copula theory and evolve with the stochastic interest rate process. A detailed numerical analysis is performed for existing equity-indexed annuities in the North American market. |
| format | Article |
| id | doaj-art-e802186c502b46f59762ca5eb6fb8f19 |
| institution | OA Journals |
| issn | 1687-952X 1687-9538 |
| language | English |
| publishDate | 2010-01-01 |
| publisher | Wiley |
| record_format | Article |
| series | Journal of Probability and Statistics |
| spelling | doaj-art-e802186c502b46f59762ca5eb6fb8f192025-08-20T02:21:39ZengWileyJournal of Probability and Statistics1687-952X1687-95382010-01-01201010.1155/2010/726389726389Pricing Equity-Indexed Annuities under Stochastic Interest Rates Using CopulasPatrice Gaillardetz0Department of Mathematics and Statistics, Concordia University, Montreal, QC, H3G 1M8, CanadaWe develop a consistent evaluation approach for equity-linked insurance products under stochastic interest rates. This pricing approach requires that the premium information of standard insurance products is given exogenously. In order to evaluate equity-linked products, we derive three martingale probability measures that reproduce the information from standard insurance products, interest rates, and equity index. These risk adjusted martingale probability measures are determined using copula theory and evolve with the stochastic interest rate process. A detailed numerical analysis is performed for existing equity-indexed annuities in the North American market.http://dx.doi.org/10.1155/2010/726389 |
| spellingShingle | Patrice Gaillardetz Pricing Equity-Indexed Annuities under Stochastic Interest Rates Using Copulas Journal of Probability and Statistics |
| title | Pricing Equity-Indexed Annuities under Stochastic Interest Rates Using Copulas |
| title_full | Pricing Equity-Indexed Annuities under Stochastic Interest Rates Using Copulas |
| title_fullStr | Pricing Equity-Indexed Annuities under Stochastic Interest Rates Using Copulas |
| title_full_unstemmed | Pricing Equity-Indexed Annuities under Stochastic Interest Rates Using Copulas |
| title_short | Pricing Equity-Indexed Annuities under Stochastic Interest Rates Using Copulas |
| title_sort | pricing equity indexed annuities under stochastic interest rates using copulas |
| url | http://dx.doi.org/10.1155/2010/726389 |
| work_keys_str_mv | AT patricegaillardetz pricingequityindexedannuitiesunderstochasticinterestratesusingcopulas |