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Regression modeling for the valuation of large variable annuity portfolios. (English) Zbl 1393.91099

Summary: Variable annuities are insurance products that contain complex guarantees. To manage the financial risks associated with these guarantees, insurance companies rely heavily on Monte Carlo simulation. However, using Monte Carlo simulation to calculate the fair market values of these guarantees for a large portfolio of variable annuities is extremely time consuming. In this article, we propose the class of GB2 distributions to model the fair market values of guarantees to capture the positive skewness typically observed empirically. Numerical results are used to demonstrate and evaluate the performance of the proposed model in terms of accuracy and speed.

MSC:

91B30 Risk theory, insurance (MSC2010)
62P05 Applications of statistics to actuarial sciences and financial mathematics
91G20 Derivative securities (option pricing, hedging, etc.)
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