STATE-DEPENDENT FEES FOR VARIABLE ANNUITY GUARANTEES

2014 ◽  
Vol 44 (3) ◽  
pp. 559-585 ◽  
Author(s):  
Carole Bernard ◽  
Mary Hardy ◽  
Anne Mackay
Keyword(s):  
Option Value ◽  
Variable Annuities ◽  
Numerical Examples ◽  
Management Fees ◽  
Fee Structure ◽  
State Dependent ◽  
Constant Rate ◽  
The Cost

AbstractFor variable annuity policies, management fees for the most basic guarantees are charged at a constant rate throughout the term of the policy. This creates a misalignment of risk and income – the fee income is low when the option value is high, and vice versa. In turn, this may create adverse incentives for policyholders, for example, encouraging surrenders when the options are far out-of-the-money.In this paper, we explore a new fee structure for variable annuities, where the fee rate supporting the cost of guarantees depends on the moneyness of those guarantees. We derive formulas for calculating the fee rates assuming fees are paid only when the guarantees are in-the-money, or are close to being in-the-money, and we illustrate with some numerical examples. We investigate the effect of this new fee structure on the surrender decision.

What's Cheaper Than Pediatric Care?

PEDIATRICS ◽  
1976 ◽  
Vol 58 (5) ◽  
pp. 772-772
Author(s):  
Richard M. Narkewicz
Keyword(s):  
Health Care ◽  
Child Care ◽  
Health Care Costs ◽  
Pediatric Care ◽  
Continuing Care ◽  
Well Child Care ◽  
Fee Structure ◽  
The Cost ◽  
Care Costs

In these days of rising health care costs, the finger has been pointed at physicians as the cause of these increases. Because of these charges each physician should look critically at his own fee structure and try to compare it with other commodities in today's budgets. I have done just that. In totaling the cost of complete well-child care for a child and continuing care through the age of 20 years, I was surprised to find that in the present fee structure it costs a family $464.25.

scholarly journals SCHEDULING IN A SINGLE-SERVER QUEUE WITH STATE-DEPENDENT SERVICE RATES

2019 ◽  
Vol 34 (4) ◽  
pp. 507-521
Author(s):  
Urtzi Ayesta ◽  
Balakrishna Prabhu ◽  
Rhonda Righter
Keyword(s):  
Optimal Policy ◽  
Arrival Rate ◽  
Complete Characterization ◽  
Single Server ◽  
Holding Costs ◽  
Release Times ◽  
State Dependent ◽  
Service Rates ◽  
Transient System ◽  
The Cost

We consider single-server scheduling to minimize holding costs where the capacity, or rate of service, depends on the number of jobs in the system, and job sizes become known upon arrival. In general, this is a hard problem, and counter-intuitive behavior can occur. For example, even with linear holding costs the optimal policy may be something other than SRPT or LRPT, it may idle, and it may depend on the arrival rate. We first establish an equivalence between our problem of deciding which jobs to serve when completed jobs immediately leave, and a problem in which we have the option to hold on to completed jobs and can choose when to release them, and in which we always serve jobs according to SRPT. We thus reduce the problem to determining the release times of completed jobs. For the clearing, or transient system, where all jobs are present at time 0, we give a complete characterization of the optimal policy and show that it is fully determined by the cost-to-capacity ratio. With arrivals, the problem is much more complicated, and we can obtain only partial results.

scholarly journals The Impact of Management Fees on the Pricing of Variable Annuity Guarantees

Risks ◽  
2018 ◽  
Vol 6 (3) ◽  
pp. 103
Author(s):  
Jin Sun ◽  
Pavel Shevchenko ◽  
Man Fung
Keyword(s):  
Numerical Experiments ◽  
Downside Risk ◽  
Equity Market ◽  
Retirement Income ◽  
Variable Annuities ◽  
Management Fees ◽  
Market Friction ◽  
Market Management ◽  
Retirement Fund ◽  
The Impact

Variable annuities, as a class of retirement income products, allow equity market exposure for a policyholder’s retirement fund with optional guarantees to limit the downside risk of the market. Management fees andguarantee insurance fees are charged respectively for the market exposure and for the protection from the downside risk. We investigate the pricing of variable annuity guarantees under optimal withdrawal strategies when management fees are present. We consider from both policyholder’s and insurer’s perspectives optimal withdrawal strategies and calculate the respective fair insurance fees. We reveal a discrepancy where the fees from the insurer’s perspective can be significantly higher due to the management fees serving as a form of market friction. Our results provide a possible explanation of lower guarantee insurance fees observed in the market than those predicted from the insurer’s perspective. Numerical experiments are conducted to illustrate the results.

An Auction Approach for Cost and Schedule Management of IT Outsourcing Project

2018 ◽  
Vol 35 (05) ◽  
pp. 1850034 ◽  
Author(s):  
Fuqiang Lu ◽  
Yanli Hu ◽  
Hualing Bi ◽  
Min Huang ◽  
Meng Zhao
Keyword(s):  
Information Technology ◽  
Utility Theory ◽  
It Outsourcing ◽  
Standard English ◽  
Management Process ◽  
English Auction ◽  
Numerical Examples ◽  
Schedule Management ◽  
Multi Attribute Utility Theory ◽  
The Cost

Cost and schedule management are important issues in an information technology outsourcing project. Generally, a client does not know much about market quotation and ability of vendors. Thus, an efficient approach should select a suitable vendor for the project with balanced cost and schedule. In this study, an improved standard English auction (ISEA) is designed, in which the multi-attribute situation is considered, and multi-attribute utility theory (MAUT) is introduced. A new auction protocol and a utility increment function are proposed, respectively. Finally, numerical examples are designed to demonstrate the auction process and its operation. Some insights are found: The ISEA is competent to describe the cost and schedule management process in an auction approach. The optimal incremental utility for client and vendor are found, and the proposed auction protocol is a mechanism for the client and vendor to obtain win–win results. The completely consistent results can be obtained from different size cases, which indicates that the validity of the designed auction mechanism and the effect of the utility increase function on the negotiation results.

Pricing three cases of performance fees using options methodology

2019 ◽  
Vol 46 (1) ◽  
pp. 56-71
Author(s):  
Tom Messmore ◽  
Travis L. Jones
Keyword(s):  
Value Added ◽  
Options Pricing ◽  
Portfolio Performance ◽  
Investment Management ◽  
Fair Price ◽  
Content Type ◽  
Management Fees ◽  
Fee Structure ◽  
Performance Fees ◽  
Investment Manager

Purpose Prior research has demonstrated that investment management performance fees have the characteristic of a call option. It is important to examine whether these performance fees are consistent with traditional fee structures used by investment managers. It is also worth examining whether clients or managers benefit significantly more than the other party under performance fee structures. The paper aims to discuss these issues. Design/methodology/approach The authors use Black-Scholes options pricing methodology to examine three cases of performance fee structures. The Absolute Hurdle case examines the fee structure where the manager receives a portion of the return over a pre-defined absolute rate of return. The Benchmark Relative Hurdle case shows a fee structure based on performance in excess of the return of a benchmark portfolio. The Breakeven Relative Hurdle case illustrates the fee structure where there is revenue neutrality with the classic management fees when portfolio performance matches the benchmark. Findings The findings of this paper illustrate that a particular performance fee structure can be designed to have the same revenue as a traditional investment management fee structure. Such a structure is equally beneficial to both the investment manager and to the client and should have salutary motivational effects to improve investment results, while simultaneously rewarding the manager for value added at a fair price for both the manager and the investor. Originality/value This study is unique in that it examines three cases of performance fees and provides a comparison between performance fee structures and traditional investment management fee structures. The findings will assist investment portfolio managers in better setting management fees they charge clients. In addition, this study help with clients who feel they are being charged excessive management fees by their investment manager.

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