A numerical scheme for the impulse control formulation for pricing variable annuities with a guaranteed minimum withdrawal benefit (GMWB)

@article{Chen2008ANS,
  title={A numerical scheme for the impulse control formulation for pricing variable annuities with a guaranteed minimum withdrawal benefit (GMWB)},
  author={Zhuliang Chen and Peter A. Forsyth},
  journal={Numerische Mathematik},
  year={2008},
  volume={109},
  pages={535-569}
}
In this paper, we outline an impulse stochastic control formulation for pricing variable annuities with a Guaranteed Minimum Withdrawal Benefit (GMWB) assuming the policyholder is allowed to withdraw funds continuously. We develop a single numerical scheme for solving the Hamilton-Jacobi-Bellman (HJB) variational inequality corresponding to the impulse control problem, and for pricing realistic discrete withdrawal contracts. We prove the convergence of our scheme to the viscosity solution of… CONTINUE READING
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