On the Pricing of Regular Premium Variable Annuities with Option Pricing Techniques

We consider the pricing of products that combine insurance with investments, known as variable annuities. We have visited in the past the problem when the premium is paid with a single installment and the cost of insurance is collected either at the beginning or periodically. We now move to examine the case of periodic premium payment so as to investigate the calculation of the cost 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 in discrete-time to find the regular premium.