Evaluation and hedging of Variable Annuities.

Cluster

Mathematics for Economics and Finance

Description

The research area is dedicated to mathematics applied to finance, economics, and insurance. The main research themes are the pricing of financial and insurance contracts, with particular attention to option pricing and financial risk management. Specifically, the research group aims to develop models to evaluate and manage life insurance policies linked to funds, and in particular a class of products known as variable annuities. These products incorporate various contractual options, allowing for example to make periodic withdrawals. We consider different numerical methods (finite differences, trees, Monte Carlo) to determine the product's price in the absence of arbitrage opportunities and to calculate the Greeks related to hedging. According to the policyholders' strategies, we consider cases of constant withdrawals, and optimal withdrawal. Depending on the stochastic model that guides the underlying fund, the combination of stochastic interest rates and stochastic volatility may be relevant to the academic world and useful to professionals.