Abstract
The aim of this paper is to value EIA contracts with surrender option at a fair price in a stochastic interest rate environment. A non Gaussian model is proposed where a new process called Kou Regime Switching process is introduced to give a more realistic modelling for financial prices. A general methodology is proposed and applied to mix GMDB and GMMB contract. Quasi-closed form solutions are given when the surrender clause is not present and this solution is incorporated into a LSMC algorithm to solve the pricing problem in the surrender case.
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