Variable Annuities and Embedded Options Valuation: Some Remarks in a Fuzzy Logic Framework

Abstract

Variable annuities are investment products offered by Insurance Companies. They allow investors to place assets in mutual funds under the umbrella of a tax-deferred account. The account value of variable annuities fluctuates based on the performance of the selected mutual funds and therefore some risks are involved.
Recently there has been a growing interest in using fuzzy numbers to deal with financial uncertainty. Many authors have tried to deal fuzziness along with randomness in option pricing models.
Aim of the present contribution is to deepen the topic of evaluating the options embedded in variable annuities contracts in a fuzzy logic framework.
Key words: Variable annuities; Option pricing; Fuzzy logic; Cox Ross Rubenstein model