The Valuation Of Guaranteed Lifelong Withdrawal Benefit In Variable Annuities Under Stochastic Interest Rates

At present Chinese old population relative number increased gradually, Chinahas entered the aging time, and Chinese domestic pension system has not kept pace.The government pressure is overweight while annuity insurance market developmentis slow and the product is too single, unable to meet the current needs of the market.In the reform slow, the development of the insurance market and innovation hasbecome a way to alleviate the pressure Chinese pension.In2010China CIRC start variable annuity products in the domestic China.Variable annuity produces in the initial period of50years in American. Until now, ithas become main products of the local insurance market. Characteristics of variableannuity products both investment and pension, can resist the decline in the purchasingpower due to inflation. The variable annuity products has some improvement for thedevelopment of China’s insurance market and domestic pension pressure.The main work of this paper is to study with the guaranteed lifelong withdrawalbenefit in variable annuities. We also give digital presentation for its process. Ourpurpose is to price the GLWB under stochastic interest rate conditions. This papertakes it as a put option and life annuity, using option value option-no arbitrageequilibrium method, deducting the relevant guarantee fees. Finally the functionrelationship between a premium and insurance cost type is established. We alsodevelop a sensitivity analysis, which shows how the value of the product varies withthe key parameters.