The purpose of this article is to value some life insurance contracts in a stochastic interest rate environment taking into account the default risk of the underlying insurance company. The participating life insurance contracts considered here can be expressed as portfolios of barrier options...

The financial guarantees embedded in variable annuity (VA) contracts expose insurers to a wide range of risks, lapse risk being one of them. When policyholders' lapse behavior differs from the assumptions used to hedge VA contracts, the effectiveness of dynamic hedging strategies can be...

This paper proposes a technique to derive the optimal surrender strategy for a variable annuity (VA) as a function of the underlying fund value. This approach is based on splitting the value of the VA into a European part and an early exercise premium following the work of Kim and Yu (1996) and...

For variable annuity policies, management fees for the most standard guarantees are charged at a constant rate throughout the term of the policy. This creates a misalignment of risk and income - the fee income is low when the option value is high, and vice versa. In turn, this may create adverse...