Evaluation of equity-linked products in the presence of policyholder surrender option using risk-control strategies

IF 1.5 Q3 BUSINESS, FINANCE
Patrice Gaillardetz, S. Hachem, Mehran Moghtadai
{"title":"Evaluation of equity-linked products in the presence of policyholder surrender option using risk-control strategies","authors":"Patrice Gaillardetz, S. Hachem, Mehran Moghtadai","doi":"10.1017/S1748499521000051","DOIUrl":null,"url":null,"abstract":"Abstract Throughout the past couple of decades, the surge in the sale of equity-linked products has led to many discussions on the evaluation and risk management of surrender options embedded in these products. However, most studies treat such options as American/Bermudian style options. In this article, a different approach is presented where only a portion of the policyholders react optimally due to the belief that not all policyholders are rational. Through this method, a probability of surrender is obtained based on the option moneyness and the product is partially hedged using local risk-control strategies. This partial hedging approach is versatile since few assumptions are required for the financial framework. To compare the different surrender assumptions, the initial capital requirement for an equity-linked product is obtained under a regime-switching equity model. Numerical examples illustrate the dynamics and efficiency of this hedging approach.","PeriodicalId":44135,"journal":{"name":"Annals of Actuarial Science","volume":"16 1","pages":"25 - 41"},"PeriodicalIF":1.5000,"publicationDate":"2021-03-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1017/S1748499521000051","citationCount":"1","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Annals of Actuarial Science","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.1017/S1748499521000051","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q3","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 1

Abstract

Abstract Throughout the past couple of decades, the surge in the sale of equity-linked products has led to many discussions on the evaluation and risk management of surrender options embedded in these products. However, most studies treat such options as American/Bermudian style options. In this article, a different approach is presented where only a portion of the policyholders react optimally due to the belief that not all policyholders are rational. Through this method, a probability of surrender is obtained based on the option moneyness and the product is partially hedged using local risk-control strategies. This partial hedging approach is versatile since few assumptions are required for the financial framework. To compare the different surrender assumptions, the initial capital requirement for an equity-linked product is obtained under a regime-switching equity model. Numerical examples illustrate the dynamics and efficiency of this hedging approach.
使用风险控制策略评估存在保单持有人放弃期权的股票挂钩产品
摘要在过去的几十年里,股票挂钩产品的销售激增,引发了许多关于这些产品中放弃期权的评估和风险管理的讨论。然而,大多数研究将这种选择视为美国/百慕大式的选择。在本文中,提出了一种不同的方法,即只有一部分投保人做出最佳反应,因为他们相信并非所有投保人都是理性的。通过这种方法,基于期权的货币性获得了放弃的概率,并使用局部风险控制策略对产品进行了部分对冲。这种部分套期保值方法是通用的,因为财务框架几乎不需要假设。为了比较不同的放弃假设,在制度转换股权模型下获得了股权挂钩产品的初始资本要求。数值例子说明了这种套期保值方法的动态性和效率。
本文章由计算机程序翻译,如有差异,请以英文原文为准。
求助全文
约1分钟内获得全文 求助全文
来源期刊
CiteScore
3.10
自引率
5.90%
发文量
22
×
引用
GB/T 7714-2015
复制
MLA
复制
APA
复制
导出至
BibTeX EndNote RefMan NoteFirst NoteExpress
×
提示
您的信息不完整,为了账户安全,请先补充。
现在去补充
×
提示
您因"违规操作"
具体请查看互助需知
我知道了
×
提示
确定
请完成安全验证×
copy
已复制链接
快去分享给好友吧!
我知道了
右上角分享
点击右上角分享
0
联系我们:info@booksci.cn Book学术提供免费学术资源搜索服务,方便国内外学者检索中英文文献。致力于提供最便捷和优质的服务体验。 Copyright © 2023 布克学术 All rights reserved.
京ICP备2023020795号-1
ghs 京公网安备 11010802042870号
Book学术文献互助
Book学术文献互助群
群 号:481959085
Book学术官方微信