Aspects of Risk Management for Variable Annuity Contracts

This session focuses on elements of PnL volatility arising from dynamically hedging VA (GMxB) contracts with a particular focus on risk-managed subaccounts. Historically, variable annuity contracts have been criticized as being underpriced in the marketplace given that the benefits and guarantees they offer are very rich. In this session, we show that the cost of hedging can be controlled if variable annuity contracts are written on risk-managed subaccounts.