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Valuing Surrender Options in Korean Interest Indexed Annuities
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Changki Kim
Published/Copyright:
April 1, 2009
We present surrender rate models with explanatory variables such as the difference between reference rates and crediting rates, policy age since issue, unemployment rates, and economy growth rates, using a logit model. We calculate the values of the surrender options in Korean interest-indexed annuities. It is interesting to note that the values of the surrender options subject to a surrender charge show negative values despite the fact that the surrender options are the right given to policyholders. We then attempt to find the fair surrender charges for the insurance company and its policyholders.
Published Online: 2009-4-1
©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
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Articles in the same Issue
- Featured Article
- A Bayesian Comparison of Models for Changing Mortalities toward Evaluating Longevity Risk in Japan
- Missing (Completely?) At Random: Lessons from Insurance Studies
- Elaborating a Catastrophic Loss Index for Insurance-linked Securities (ILS): A Continuous Model
- Valuing Surrender Options in Korean Interest Indexed Annuities
- Estimation of Capital Beta and Cost of Capital: A Focus on Japanese Property-liability Insurance Companies and Lines of Business
- Alternative Pricing Models of Deposit Insurance under Capital Forbearance
- A Comparison of Corporate Bankruptcy Models in Australia: The Merton vs. Accounting-based Models
- Country Study: 2008 Review of the Middle East and North Africa (MENA) Insurance Markets
