The effect of the real option to transfer on the value of guaranteed minimum death benefits

    Authors

    E. R. Ulm

    Comments

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    Abbreviated Journal Title

    J. Risk Insur.

    Keywords

    Business, Finance; Economics

    Abstract

    Variable annuity contracts frequently have many options and option-like features embedded in the contracts. Some are obvious, such as guaranteed minimum death benefits (GMDBs), while others are less obviously option-like. In this article, we consider the effect of the real option to transfer funds between fixed and variable accounts. If a GMDB rider is considered in isolation, it is sometimes in the policyholder's interest to transfer to the fixed fund if the fixed fund earns less than the variable fund in a risk-neutral world. On the other hand, the option to transfer will not be used if the entire annuity and rider are considered together.

    Journal Title

    Journal of Risk and Insurance

    Volume

    73

    Issue/Number

    1

    Publication Date

    1-1-2006

    Document Type

    Article

    Language

    English

    First Page

    43

    Last Page

    69

    WOS Identifier

    WOS:000235724900003

    ISSN

    0022-4367

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