Designing, Pricing and Hedging a Variable Annuity with Guaranteed Living Benefits

   


  This module is part of FM 5032 A Practitioner's Course in Finance .  FM 5032 is a required course for the University of Minnesota's Masters in Financial Mathematics (MFM) program.

Instructor

                   Gary Hatfield, PhD, FSA, MAAA, CFA
                   Investment Actuary, Securian Financial Group

Lectures:

Lecture 1

Lecture 2

Lecture 3

Lecture 4

 

Homework

Homework 1

HW1 Answers

 

Homework 2

Homework 3

Final Project

Topics

  • Variable Annuities
    • Background,  basic design, market, and distribution
    • Importance and history of guarantees.
    • Inventory of common guarantees (GMIB, GMWB, GMAB etc).
    • Accounting considerations
  • Pricing
    • Monte Carlo simulation
    • Impact of policy holder behavior assumptions
    • Capital Markets Assumptions
      • Interest Rates
      • Market Volatilities
      • Dealing with incomplete market information
    • Objectives of pricing
  • Hedging
    • Static versus dynamic
    • What to hedge?
    • Hedging Instruments
    • Operational considerations
      • Frequency of valuation
      • Frequency of rebalancing
      • Attribution
    • Risk Management
      • Operational risks.
      • Separation of duties.
      • Oversight and reporting.

Syllabus

          

Text

           No official text book. However, students are expected to have read the articles linked below.

  •  Variable Annuities.  This gives a nice overview of Variable Annuities with guarantees. UK perspective.

 

 

Last Modified Monday, November 05, 2007

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