Title

The Effect Of The Real Option To Transfer On The Value Of Guaranteed Minimum Death Benefits

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. © The Journal of Risk and Insurance, 2006.

Publication Date

3-1-2006

Publication Title

Journal of Risk and Insurance

Volume

73

Issue

1

Number of Pages

43-69

Document Type

Article

Personal Identifier

scopus

DOI Link

https://doi.org/10.1111/j.1539-6975.2006.00165.x

Socpus ID

33644668105 (Scopus)

Source API URL

https://api.elsevier.com/content/abstract/scopus_id/33644668105

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