Pricing of a long-term care annuity with withdrawal guarantee using the exact individual trajectories method

Massimo Angrisani; Maria Giuseppina Bruno; Cinzia Di Palo; Pierluigi Fava; Maria Rita  Scarpitti

doi:10.13133/2611-6634/494

Authors

Massimo Angrisani Sapienza University of Rome https://orcid.org/0000-0001-9793-9441
Maria Giuseppina Bruno Sapienza University of Rome https://orcid.org/0000-0003-4867-7689
Cinzia Di Palo Università degli studi di Cassino e del Lazio Meridionale https://orcid.org/0000-0002-4164-051X
Pierluigi Fava Sapienza University of Rome https://orcid.org/0000-0003-1033-0292
Maria Rita Scarpitti Sapienza University of Rome https://orcid.org/0000-0002-4331-7214

DOI:

https://doi.org/10.13133/2611-6634/494

Keywords:

Markov chain, long-term care, variable annuity, life care annuity, guaranteed lifetime withdrawal benefits, Heston model, exact individual trajectories

Abstract

The present work aims at evaluating Long-Term Care annuity contracts with Guaranteed Lifetime Withdrawal Benefits using the method of the Exact Individual Trajectories. This model, basically developed for the management of pension funds, is setup on an axiomatic basis and allows a complete description of the sample space. In addiction the financial component of the contract is modelled through the Heston model which considers stochastic both the stock price and the volatility.

Pricing of a long-term care annuity with withdrawal guarantee using the exact individual trajectories method

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Annali del Dipartimento di Metodi e modelli per l'economia, il territorio e la finanza