Impacts of Jumps and Stochastic Interest Rates on the Fair Costs of Guaranteed Minimum Death Benefit Contracts

in Geneva Risk and Insurance Review, 36 (1)

ISSN : 1554-964X

Quittard-Pinon, François (1945-....) ; Randrianarivony, Rivo

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The authors offer a new perspective to the field of guaranteed minimum death benefit contracts, especially for simple return premium and rising floor guarantees. A particular feature of these contracts is a guaranteed capital upon the insured’s death. A complete methodology based on the generalized Fourier transform is proposed to investigate the impacts of jumps and stochastic interest rates. This paper thus extends Milevsky and Posner (2001). If jumps alone are considered, similar results are ... obtained, but, when stochastic interest rates are introduced, the fair costs of the guarantee feature are found to be substantially higher in this more general economy.

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