Centro de Documentacion de Fundación MAPFRE - The Effect of the asumed interest rate and smoothing on variable annuities

MAP20200009931

The Effect of the asumed interest rate and smoothing on variable annuities / Anne G. Balter, Bas J. M. Werker

Sumario: In this paper, we consider the risk-return trade-off for variable annuities in a Black-Scholes setting. Our analysis is based on a novel explicit allocation of initial wealth over the payments at various horizons. We investigate the relationship between the optimal consumption problem and the design of variable annuities by deriving the optimal so-called assumed interest rate for an investor with constant relative risk aversion preferences. We investigate the utility loss due to deviations from this. Finally, we show analytically how habit-formation-type smoothing of financial market shocks over the remaining lifetime leads to smaller year-to-year volatility in pension payouts, but to increases in the longer-term volatility

En: Astin bulletin. - Belgium : ASTIN and AFIR Sections of the International Actuarial Association = ISSN 0515-0361. - 01/01/2020 Volumen 50 Número 1 - enero 2020 , p. 131-154

1. Tasas de interés . 2. Cálculo actuarial . 3. Modelos actuariales . 4. Mercados financieros . I. Balter, Anne G. . II. Werker, Bas J. M. . III. Title.