Abstract
In this paper, we study the valuation problem of life-contingent lookback options embedded in variable annuity with guaranteed minimum death benefit (GMDB). Specifically, the underlying asset price process is assumed to be an exponential regime-switching Levy process, which is observed periodically. The Fourier cosine series expansion method is applied to compute exponential moments of the discretely monitored maximum and minimum of the regime-switching Levy process. Furthermore, some explicit pricing formulas for the life-contingent lookback options embedded in GMDB products are derived. Finally, numerical experiments confirm the accuracy and efficiency of our method. (C)& nbsp;2022 Elsevier B.V. All rights reserved.
NSTL
Elsevier