ERM-417-19: A Natural Hedge for Equity Indexed Annuities


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Reading Source: https://www.researchgate.net/publication/228658447_A_Natural_Hedge_for_Equity_Indexed_Annuities

Topics Covered in this Reading:

  • Introduction
  • The Equity Linked Annuity Market
    • Variable Annuities
    • Equity Indexed Annuities
  • Two Types of Equity Indexed Annuities
    • Standard EIA
    • Monthly Sum Cap
    • Comparison of the Two Designs and their Sensitivity to Volatility
    • Cliquet Option, Annual Guarantee or Local Floor
  • Natural Hedge for Insurers
    • Reducing Sensitivity to the Volatility Parameter
  • Conclusions and Limitations
  • Pricing the Two Contracts
  • Accurate FFT Pricing of Monthly Sum Caps
  • Description and Pricing of Cliquet Feature