Abstract

This paper presents an efficient and accurate method for pricing equity-indexed annuities (EIAs) with cliquet-style payoff structures under time-changed Lévy processes. We apply a square-root process to depict the activity rate process in stochastic time change, which enables us to use some Fourier transform methods to price EIAs. As the complexity of payoff structures, we make use of frame duality projection associated with the quadrature rule and the spectral filtering to realize our algorithm. Numerical experiments are reported to demonstrate the accuracy and efficiency of our approach.

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