policies. The purpose of the examination is to determine which of the alternative pricing approaches for guaranteed annuity option policies is the most accurate and feasible for application by insurers.
The study reviews relevant literature on the pricing approaches for guaranteed annuity option policies. Three of the pricing approaches - replicating portfolio techniques, lattice methods, and simulation methods - are subjected to further analysis to assess the comparative accuracy of pricing and feasibility of application by insurers.
The method of analysis for the determination of the comparative accuracy of the three pricing approaches for guaranteed annuity option policies is meta-analysis. Meta-analysis is an effective approach to learn what is effective across many studies in relation to a variety of issues. In essence, meta-analysis is a statistical analysis of the outcomes of previously conducted and published research studies. The statistical procedures employed permit an evaluation of the validity of a number of theoretical explanations for a relationship. The dependent variable in a meta-analysis is the effect size of the outcomes resulting from the presence or absence in the sampled studies of each of the relevant predictor (independent) variables (Vollet and Bousset, 2002).
Being able to evaluate the validity of a number of theoretical explanations means that the determination of effect sizes, which is quite similar to the determination of an F-ratio used in analysis of variance (ANOVA), does not limit the researcher with respect to the type of variables considered in explaining the value differences for the dependent variable. Regression analysis, as an example limits the researcher to the consideration of only those explanatory variables where comparable quantitative linear values are available for both the dependent and the explanatory variables (Vollet and Bousset, 2002).
Effectively applied, me...