Fig 4.5 single graph with four models

With this exercise VAs with GMAB and GMDB riders are priced by means of the static amd mixed approaches. The caracteristics of the contracts are the following:

• Contract expires at T = 15 years
• Age of the policyholder at contract inception is 50
• Both GMAB and GMDB pay the minimum amount as the roll-up of premium.
• The roll-up rates is 2%
• The fee is state-dependent and the base fee varies from 1% to 13%
• The state-dependent barrier is the GMAB minimum amount at T = 15
• The surrender penalty is 2% constant.

With regards to the simulation:

• The number of Monte Carlo simulations will be 20000.
• We’re going to calculate the contract value with all four models.

The regression in LSMC is done only when the account is below the barrier.
Two graphs, one for the mixed approach and another for the static, will be printed. Each graph reports all four models. Here model 1 is the simplest GBM deterministic Weibull mortality case and we increase the complexity up to model 4 which is the full model in BMOP2011.