The Effect of the Real Option to Transfer on the Value of Guaranteed Minimum Death Benefits
Year: 2006
Type: article
Abstract: Variable annuity contracts frequently have many options and option‐like features embedded in the contracts. Some are obvious, such as guaranteed minimum death benefits (GMDBs), while others are less obviously option‐like. In this article, we consider the effect of the real option to transfer funds between fixed and variable accounts. If a GMDB rider is considered in isolation, it is sometimes in the policyholder's interest to transfer to the fixed fund if the fixed fund earns less than the variable fund in a risk‐neutral world. On the other hand, the option to transfer will not be used if the entire annuity and rider are considered together.
Source: Journal of Risk & Insurance
Author: Eric R. Ulm
Institution: University of Central Florida
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2169761467