On the pricing of variable annuities with option pricing techniques

Abstract
            The pricing of a series of products that combine insurance with investments, known as Variable Annuities is considered. We have discussed in the past the problem in the case that there is a single premium installment and that the cost of insurance is collected only at the beginning. We now move to examine the case that management fees need to be paid periodically via the cancellation of units and study the calculation of the charge that needs to be made by the insurer. We do not use standard actuarial techniques, but rather realize that the risk borne by the insurer resembles to the payoff of an option. We attempt to follow option valuation techniques to find the insurance premium.