Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/103663
Authors: 
Mahayni, Antje
Schlögl, Erik
Year of Publication: 
2008
Citation: 
[Journal:] BuR - Business Research [ISSN:] 1866-8658 [Volume:] 1 [Year:] 2008 [Issue:] 1 [Pages:] 55-76
Abstract: 
Contracts paying a guaranteed minimum rate of return and a fraction of a positive excess rate, which is specified relative to a benchmark portfolio, are closely related to unit-linked life-insurance products and can be considered as alternatives to direct investment in the underlying benchmark. They contain an embedded power option, and the key issue is the tractable and realistic hedging of this option, in order to rigorously justify valuation by arbitrage arguments and prevent the guarantees from becoming uncontrollable liabilities to the issuer. We show how to determine the contract parameters conservatively and implement robust risk-management strategies.
Subjects: 
minimum return guarantee
defined-contribution pension plans
life-insurance
uncertain volatility
conservative pricing
robust hedging
model misspecification
model risk
Persistent Identifier of the first edition: 
Document Type: 
Article

Files in This Item:
File
Size
349.48 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.