WS 2009/2010
Donnerstag, 3. Dezember, 15:00 - 17:00, Raum 062 (Lehrstuhl BWLIII)
Antje Mahayni (University of Duisburg)
Topic: Variable Annuities-The Option to Switch Investment Decisions
Abstract: Variable Annuities include a variety of products and riders. We analyze the so called guaranteed minimum accumulation benefits (GMAB). These are investment products providing a guaranteed minimum(survival) benefit. Our main focus is on the additional rider to choose, at different times, between investments in multiple assets. The GMBA contract under consideration can be interpreted in terms of an investment strategy which is backed up by a put option. We price the contract according to the investment strategy which maximizes the value of the put option, i.e. the most risky one. It turns out that the strategy consists of one asset only, independent of the assumptions which are posed on the asset price dynamics. In addition, the most risky strategy is easily identified in the context of lognormal models where the risk is exclusively defined in terms of the asset price volatilities. Finally, we also consider the case of stochastic volatility where we rely on the Heston model.
