December 2013
Intermediate to advanced
484 pages
14h 54m
English
Content preview from Nonlinear Option Pricing
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Numerical results using PDEs 207
Figure 8.2: Price of the vanilla GMxB using (a) the optimal lapse rate
(ULMM), (b) only the minimum lapse rate, and (c) only the maximum lapse
rate. The minimum lapse rate is flat at 2%, except for year 1 (0%) and year
2 (0.5%). The maximum lapse rate equals the minimum lapse rate plus 15%.
The minimum mortality rate increases linearly over [0, T ], from 0.5% to 1.5%.
The maximum mortality rate equals the minimum mortality rate. X
0
= 100,
K
mat
= 91.2%X
0
, K
D
= 100%X
0
, α = 2.20%, T
UO
= 3, one trigger only at
120%X
0
, T = 10, σ = 13%.
208 The Uncertain Lapse and Mortality Model
28/09/12 1 100.118 100.2099
29/03/13 1 100.0054
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