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Application of metamodeling to the valuation of large variable annuity portfolios

Published: 06 December 2015 Publication History

Abstract

Variable annuities are long-term investment vehicles that have grown rapidly in popularity recently. One major feature of variable annuities is that they contain guarantees. The guarantees embedded in variable annuities are complex and the values of the guarantees cannot be obtained from closed-form formulas. Insurance companies rely heavily on Monte Carlo simulation to calculate the fair market values of the guarantees. Valuation and risk management of a large portfolio of variable annuities are a big challenge to insurance companies because the Monte Carlo simulation model is very time consuming. In this paper, we propose to use a metamodeling approach to speed up the valuation of large portfolios of variable annuities. Our numerical results show that the metamodeling approach can reduce the runtime significantly and produce accurate approximations.

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    WSC '15: Proceedings of the 2015 Winter Simulation Conference
    December 2015
    4051 pages
    ISBN:9781467397414

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    Published: 06 December 2015

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    December 6 - 9, 2015
    California, Huntington Beach

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    WSC '15 Paper Acceptance Rate 202 of 296 submissions, 68%;
    Overall Acceptance Rate 3,413 of 5,075 submissions, 67%

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