Valuation of variable long-term care annuities with guaranteed lifetime withdrawal benefits: a variance reduction approach. (English) Zbl 1398.91332

Summary: This paper proposes a new product, the variable life care annuity with guaranteed lifetime withdrawal benefits (LCA-GLWB), and designs an efficient valuation algorithm. This innovative product provides a comprehensive retirement solution for both longevity risk and long-term care protection. It includes the benefits of guaranteed income streams with downside risk protection and long-term care expenses for retirees. However, the valuation of this type of product is both complex and time-consuming. In this paper, we propose a Monte Carlo valuation algorithm that uses the variance reduction technique. The numerical results indicate that the proposed valuation algorithm is very efficient under a broad range of asset return models. The proposed algorithm provides a general approach for the rapid valuation of similar products and can help provide life insurance companies offering innovative products with an appropriate valuation tool.


91B30 Risk theory, insurance (MSC2010)
91G20 Derivative securities (option pricing, hedging, etc.)
91G60 Numerical methods (including Monte Carlo methods)
Full Text: DOI


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