DSAS - MSc Public Lecture - Yiming Huang

TITLE: A computationally efficient methodology in pricing a guaranteed minimum accumulation benefit

ABSTRACT: 

In this thesis, we consider a framework under which three correlated factors, namely, financial, mortality and lapse risks, are modelled in an integrated way. This modelling framework supports the valuation of a guaranteed minimum accumulation benefit (GMAB). The change-of-measure approach is employed to come up with a compact and implementable valuation expressions. We provide a numerical demonstration to confirm the e fficiency and accuracy of our proposed pricing methodology. In particular, our approach on average takes only 0.07% of the computing time entailed by the Monte-Carlo (MC) simulation technique. Furthermore, the standard errors of our approach’s results are lower than those obtained from MC-based computations. When there are no renewal options in a GMAB contract, we get the special case of a guaranteed minimum maturity benefit for which a closed-form pricing solution is derived.

Supervisor: Dr. Rogemar S. Mamon