• DOI:10.2307/2678133
Corpus ID: 14384914

The Titanic Option: Valuation of the Guaranteed Minimum Death Benefit in Variable Annuities and Mutual Funds

@article{Milevsky2001TheTO,
  title={The Titanic Option: Valuation of the Guaranteed Minimum Death Benefit in Variable Annuities and Mutual Funds},
  author={M. Milevsky and S. Posner},
  journal={Journal of Risk and Insurance},
  year={2001},
  volume={68},
  pages={93}
}

M. Milevsky, S. Posner

Published 2001

Economics

Journal of Risk and Insurance

ABSTRACT The authors use risk-neutral option pricing theory to value the guaranteed minimum death benefit (GMDB) in variable annuities (VAs) and some recently introduced mutual funds. A variety of death benefits, such as return-of-premium, rising floors, and "ratches," are analyzed. Specifically, the authors compute the fair insurance risk fee, charged to assets, that funds the embedded option. The authors derive analytic option prices for a simplified exponential mortality model and robust… CONTINUE READING

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