Pricing and hedging guaranteed annuity options
Mathematics and Economics, Vol.
In this paper we derive a market value for Guaranteed Annuity Option using martingale modeling techniques. Furthermore, we show how to construct a static replicating portfolio of vanilla interest rate swaptions that replicates the Guaranteed Annuity Option.
RESERVING, PRICING AND HEDGING FOR POLICIES WITH GUARANTEED ANNUITY OPTIONS on JSTOR
Finally, we illustrate with historical UK interest rate data from the period until that the static replicating portfolio is extremely effective as a hedge against the interest rate risk involved in the GAO, that the static replicating portfolio is considerably cheaper than up-front reserving and also that the replicating portfolio provides a much better level of protection than an up-front reserve. Pelsser, Antoon, Pricing and Hedging Guaranteed Annuity Options Via Static Option Replication Subscribe to this fee journal for more curated articles on this topic.
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Antoon Pelsser Maastricht University; Netspar. Abstract In this paper we derive a market value for Guaranteed Annuity Option using martingale modeling techniques.
Pelsser Contact Author Maastricht University email P. Box Maastricht, MD Netherlands HOME PAGE: Box Tilburg, LE Netherlands.
Pricing and Hedging Guaranteed Annuity Options Via Static Option Replication by Antoon Pelsser :: SSRN
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