Valuation of guaranteed annuity conversion options. 87-108. In this note we introduce a theoretical model for the pricing and valuation of guaranteed annuity conversion options associated with certain deferred annuity pension-type contracts in the U.K. The valuation approach is based on the similarity between the payoff structure of the contract and a call option written on a coupon-bearing bond. The model makes use of a onefactor Heath^Jarrow^Morton framework for the term structure of interest rates. Numeric…
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