Variable Annuities: Market Incompleteness and Policyholder Behavior

2021 ◽  
Author(s):  
Thorsten Moenig
Keyword(s):  
Variable Annuities ◽  
Market Incompleteness

Local Hedging of Variable Annuities in the Presence of Basis Risk

2017 ◽  
Author(s):  
Denis-Alexandre Trottier ◽  
Frrddric Godin ◽  
Emmanuel Hamel
Keyword(s):  
Variable Annuities ◽  
Basis Risk

Basis Risk in Variable Annuities

2020 ◽  
Author(s):  
Wenchu Li ◽  
Thorsten Moenig ◽  
Maciej Augustyniak
Keyword(s):  
Variable Annuities ◽  
Basis Risk

Hedging of Variable Annuities under Basis Risk

2020 ◽  
Vol 14 (2) ◽  
Author(s):  
Jan Bauer
Keyword(s):  
Financial Market ◽  
Negative Impact ◽  
Mathematical Finance ◽  
Insurance Company ◽  
Hedging Strategy ◽  
Variable Annuities ◽  
Basis Risk ◽  
Hedging Strategies ◽  
Cross Hedging ◽  
Geometric Brownian Motions

AbstractI study dynamic hedging for variable annuities under basis risk. Basis risk, which arises from the imperfect correlation between the underlying fund and the proxy asset used for hedging, has a highly negative impact on the hedging performance. In this paper, I model the financial market based on correlated geometric Brownian motions and analyze the risk management for a pool of stylized GMAB contracts. I investigate whether the choice of a suitable hedging strategy can help to reduce the risk for the insurance company. Comparing several cross-hedging strategies, I observe very similar hedging performances. Particularly, I find that well-established but complex strategies from mathematical finance do not outperform simple and naive approaches in the context studied. Diversification, however, could help to reduce the adverse impact of basis risk.

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