Pricing pension plans based on average salary without early retirement: partial differential equation modeling and numerical solution
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Pricing pension plans based on average salary without early retirement: partial differential equation modeling and numerical solutionDate
2012Citation
Calvo-Garrido, M.C. & Vázquez, C. (2012) Pricing pension plans based on average salary without early retirement: partial differential equation modeling and numerical solution, Journal of Computational Finance, 16 (2012), 1, 111-140. https://doi.org/10.21314/JCF.2012.243
Abstract
[Abstract] In this paper, a partial differential equation model for the pricing of pension plans
based on average salary is posed by using the dynamic hedging methodology. The
existence and uniqueness of solutions for the resulting initial-value problem associated
with a Kolmogorov equation is obtained. Moreover, a numerical method
based on a Crank–Nicolson characteristics time discretization combined with
finite elements to approximate the solution is proposed. Finally, some test examples
illustrate the performance of the numerical methods as a tool for pricing
these pension plans.
Keywords
Pricing pension plans
Partial differential equation modeling
Partial differential equation modeling
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