Pricing ratchet equity index annuity with mortality risk by complex Fourier series method (Q6049332)

The paper deals with the pricing of the ratchet equity-indexed annuity (EIA) which incorporates mortality risk under the time-changed Lévy process. With regard to the pricing techniques, the authors use an approach involving the complex Fourier series method. After introducing some basic issues concerning the time-changed Lévy process and the complex Fourier series method, the valuation of the ratchet EIA is treated by means of the complex Fourier series method, when the mortality risk is considered. Then, the error from the pricing algorithm is studied. Numerical examples show the performance of the efficiency and accuracy of the complex Fourier series method for pricing the annual ratchet contract; the numerical evidence presented in the paper is carried out under a variety of time-changed Lévy processes.