City Research Online

Efficient pricing of ratchet equity-indexed annuities in a variance-gamma economy

Ballotta, L. (2010). Efficient pricing of ratchet equity-indexed annuities in a variance-gamma economy. North American Actuarial Journal, 14(3), pp. 355-368. doi: 10.1080/10920277.2010.10597639

Abstract

In this paper we propose a new method for approximating the price of arithmetic Asian options in a Variance-Gamma (VG) economy, which is then applied to the problem of pricing equityindexed annuity contracts. The proposed procedure is an extension to the case of a VG-based model of the moment-matching method developed by Turnbull and Wakeman and Levy for the pricing of this class of path-dependent options in the traditional Black-Scholes setting. The accuracy of the approximation is analyzed against RQMC estimates for the case of ratchet equityindexed annuities with index averaging.

Publication Type: Article
Additional Information: This is an Accepted Manuscript of an article published by Taylor & Francis in NORTH AMERICAN ACTUARIAL JOURNAL in 2010, available online: http://wwww.tandfonline.com/10.1080/10920277.2010.10597639."
Publisher Keywords: Asian options, Equity Indexed Annuities, risk neutral valuation, Randomized Quasi-Monte Carlo, variance reduction techniques.
Subjects: H Social Sciences > HG Finance
Departments: Bayes Business School > Finance
SWORD Depositor:
[thumbnail of EIANAAJsub.pdf]
Preview
PDF - Accepted Version
Download (277kB) | Preview

Export

Add to AnyAdd to TwitterAdd to FacebookAdd to LinkedinAdd to PinterestAdd to Email

Downloads

Downloads per month over past year

View more statistics

Actions (login required)

Admin Login Admin Login