TY - JOUR
T1 - Equity-linked annuity valuation under fractional jump-diffusion financial and mortality models
AU - Jiang, Haoran
AU - Zhang, Zhehao
N1 - Publisher Copyright:
© 2024 Informa UK Limited, trading as Taylor & Francis Group.
PY - 2024
Y1 - 2024
N2 - The valuation of equity-linked annuity (EIA) has been extensively studied, while few papers consider the impact of long-range dependence (LRD) features on financial and mortality dynamics in EIAs' valuation. To characterise the LRD feature, we adopt the fractional Brownian motion (FBM) in modelling the dynamics of asset prices and mortality intensities, in which clustering jumps are captured by the compound Hawkes process. Besides, the interest rate dynamic is driven by the FBM and correlates to the asset price dynamic. Numerical analyses show that ignorance of the LRD feature and the jump component in the modelling framework could lead to a potential deficiency in the reserve and solvency capital of EIA policies.
AB - The valuation of equity-linked annuity (EIA) has been extensively studied, while few papers consider the impact of long-range dependence (LRD) features on financial and mortality dynamics in EIAs' valuation. To characterise the LRD feature, we adopt the fractional Brownian motion (FBM) in modelling the dynamics of asset prices and mortality intensities, in which clustering jumps are captured by the compound Hawkes process. Besides, the interest rate dynamic is driven by the FBM and correlates to the asset price dynamic. Numerical analyses show that ignorance of the LRD feature and the jump component in the modelling framework could lead to a potential deficiency in the reserve and solvency capital of EIA policies.
KW - change of measure
KW - Equity-indexed annuities
KW - fractional Brownian motion
KW - Hawkes process
KW - long-range dependence
UR - http://www.scopus.com/inward/record.url?scp=85206566678&partnerID=8YFLogxK
U2 - 10.1080/03461238.2024.2415655
DO - 10.1080/03461238.2024.2415655
M3 - Article
AN - SCOPUS:85206566678
SN - 0346-1238
JO - Scandinavian Actuarial Journal
JF - Scandinavian Actuarial Journal
ER -