The computation of various risk metrics is essential to the quantitative risk management of variable annuity guaranteed benets. The current market practice of Monte Carlo simulation often requires intensive computations, which can be very costly for insurance companies to implement and take so much time that they cannot obtain information and take actions in a timely manner. In an attempt to nd low-cost and ecient alternatives, we explore the techniques of comonotonic bounds to produce closed-form approximation of the risk measures for variable annuity guaranteed benets. The techniques are further developed in this paper to address in a systematic way risk measures for death benets with the consideration of dynamic policyholder behavior.
# 15-008/IV/DSF85 (2015-01-16)
- Runhuan Feng, University of Illinois at Urbana-Champaign, United States; Xiaochen Jing, University of Illinois at Urbana-Champaign, United States; Jan Dhaene, Katholieke Universiteit Leuven, Belgium
- Variable annuity guaranteed benefit, risk measures, value at risk, conditional tail expectation, geometric Brownian motion, comonotonicity, dynamic policyholder behavior
- JEL codes:
- G19, C63