EVALUATING QUANTILE RESERVE FOR EQUITY-LINKED INSURANCE IN A STOCHASTIC VOLATILITY MODEL: LONG VS. SHORT MEMORY

NCUIR > School of Management at National Central University > Department of Finance > journal & Dissertation > Item 987654321/51687

Please use this identifier to cite or link to this item: http://ir.lib.ncu.edu.tw/handle/987654321/51687

Title:	EVALUATING QUANTILE RESERVE FOR EQUITY-LINKED INSURANCE IN A STOCHASTIC VOLATILITY MODEL: LONG VS. SHORT MEMORY
Authors:	Ho,HC;Yang,SS;Liu,FI
Contributors:	財務金融學系
Keywords:	INTEREST-RATE GUARANTEES;DEPENDENT DATA;CONDITIONAL HETEROSKEDASTICITY;RETURN GUARANTEES;RISK MEASURES;PRICING RATE;VALUATION;BOOTSTRAP;VARIANCE;PRICES
Date:	2010
Issue Date:	2012-03-27 19:02:49 (UTC+8)
Publisher:	國立中央大學
Abstract:	This paper evaluates the long-term risk for equity-linked insurance products. We consider a specific type of equity-linked insurance product with guaranteed minimum maturity benefits (GMMBs), and assume that the underlying equity follows the stochastic volatility model which allows the return's latent volatility component to be short- or long-memory. The explicit form of the quantile reserve or the Value at Risk and its confidence intervals are derived for both the long-memory and short-memory stochastic volatility models. To illustrate the effect of long-memory volatility, we use the S&P 500 index as an example of linked equity. Simulation studies are performed to examine the accuracy of the quantile reserve and to demonstrate the consequence of low coverage probability if model misspecification takes place. The empirical results show that the confidence interval of quantile reserve could be severely underestimated if the long-memory effect in equity volatility is ignored.
Relation:	ASTIN BULLETIN
Appears in Collections:	[Department of Finance] journal & Dissertation

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