Department of Finance
Date of this Version
2004
Document Type
Article
Citation
Journal of Actuarial Practice 11 (2204), pp. 169-196
Abstract
This paper presents a new method of obtaining quick and accurate values and deltas for discrete look back options using Taylor series expansions. This method is applied to the case of ratchet guaranteed minimum death benefits attached to annuity contracts, and the method is extended to include annuities where a fixed fund is attached to the variable account. Finally, both the speed and the accuracy of the method are compared to Monte Carlo simulation and the exact analytic solution. The Taylor expansion method is shown to be faster and, in most cases, more accurate than the alternative methods.
Included in
Accounting Commons, Business Administration, Management, and Operations Commons, Corporate Finance Commons, Finance and Financial Management Commons, Insurance Commons, Management Sciences and Quantitative Methods Commons
Comments
Copyright 2004 Absalom Press