Artikel
Using neural networks to price and hedge variable annuity guarantees
This paper explores the use of neural networks to reduce the computational cost of pricing and hedging variable annuity guarantees. Pricing these guarantees can take a considerable amount of time because of the large number of Monte Carlo simulations that are required for the fair value of these liabilities to converge. This computational requirement worsens when Greeks must be calculated to hedge the liabilities of these guarantees. A feedforward neural network is a universal function approximator that is proposed as a useful machine learning technique to interpolate between previously calculated values and avoid running a full simulation to obtain a value for the liabilities. We propose methodologies utilizing neural networks for both the tasks of pricing as well as hedging four different varieties of variable annuity guarantees. We demonstrated a significant efficiency gain using neural networks in this manner. We also experimented with different error functions in the training of the neural networks and examined the resulting changes in network performance.
- Sprache
-
Englisch
- Erschienen in
-
Journal: Risks ; ISSN: 2227-9091 ; Volume: 7 ; Year: 2019 ; Issue: 1 ; Pages: 1-19 ; Basel: MDPI
- Klassifikation
-
Wirtschaft
- Thema
-
variable annuities
GMxB
hedging
neural networks
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Doyle, Daniel
Groendyke, Chris
- Ereignis
-
Veröffentlichung
- (wer)
-
MDPI
- (wo)
-
Basel
- (wann)
-
2019
- DOI
-
doi:10.3390/risks7010001
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:42 MEZ
Datenpartner
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Artikel
Beteiligte
- Doyle, Daniel
- Groendyke, Chris
- MDPI
Entstanden
- 2019
Ähnliche Objekte (12)
Price guarantees, consumer search, and hassle costs
Price Guarantees, Consumer Search, and Hassle Costs
Price guarantees, consumer search, and hassle costs
Evaluation of variable annuity guarantees with the effect of jumps in the asset price process
Advertising as a Signal When Price Guarantees Quality
Minimum Price Guarantees In a Consumer Search Model
Uniform concentration of tensor and neural networks : an approach towards recovery guarantees
Hedges, Ludwig
Markups as a hedge for input price uncertainty: Evidence from Sweden
A unified pricing of variable annuity guarantees under the optimal stochastic control framework
Drafting purchase price adjustment clauses in M&A : guarantees, retrospective and future oriented purchase price adjustment tools
Neural network approximation for superhedging prices
Price guarantees, consumer search, and hassle costs
Price Guarantees, Consumer Search, and Hassle Costs
Price guarantees, consumer search, and hassle costs
Evaluation of variable annuity guarantees with the effect of jumps in the asset price process
Advertising as a Signal When Price Guarantees Quality
Minimum Price Guarantees In a Consumer Search Model
Uniform concentration of tensor and neural networks : an approach towards recovery guarantees
Hedges, Ludwig
Markups as a hedge for input price uncertainty: Evidence from Sweden
A unified pricing of variable annuity guarantees under the optimal stochastic control framework
Drafting purchase price adjustment clauses in M&A : guarantees, retrospective and future oriented purchase price adjustment tools
Neural network approximation for superhedging prices
Price guarantees, consumer search, and hassle costs
Price Guarantees, Consumer Search, and Hassle Costs
Price guarantees, consumer search, and hassle costs
Evaluation of variable annuity guarantees with the effect of jumps in the asset price process
Advertising as a Signal When Price Guarantees Quality
Minimum Price Guarantees In a Consumer Search Model
Uniform concentration of tensor and neural networks : an approach towards recovery guarantees
Hedges, Ludwig
Markups as a hedge for input price uncertainty: Evidence from Sweden
A unified pricing of variable annuity guarantees under the optimal stochastic control framework
Drafting purchase price adjustment clauses in M&A : guarantees, retrospective and future oriented purchase price adjustment tools