Abstract
Ratchet EIAs are the most popular equity-indexed annuities (EIAs) because returns are credited periodically with a guaranteed minimum and the account value never decreases once the return is credited. Pricing ratchet EIAs, however, is challenging. This paper derives pricing formulas that cover more contract features of ratchet EIAs than any in the literature. We obtain closed-form solutions in the Black-Scholes framework for both compound and simple versions of annual-reset ratchet products that may have a return cap and employ two types of geometric return averaging. Our numerical results demonstrate the impacts of individual contract features on contract value and the interactions among these features.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
