S
ST6_aspirant
Member
Hi,
My question relates to Question Bank 3.14
To calculate the cost of guarantee, why do we need to know the inflation rate from a stochastic model? We would want to know just the stochastic investment yield at the projected retirement date, so that we can calculate the COG. Unless, we are also trying to project the expenses in the annuity payout period and taking account of them to calculate the new purchase price and hence the shortfall vis-a-vis the guaranteed purchase price (or guaranteed annuity, either way)
Thanks!
My question relates to Question Bank 3.14
To calculate the cost of guarantee, why do we need to know the inflation rate from a stochastic model? We would want to know just the stochastic investment yield at the projected retirement date, so that we can calculate the COG. Unless, we are also trying to project the expenses in the annuity payout period and taking account of them to calculate the new purchase price and hence the shortfall vis-a-vis the guaranteed purchase price (or guaranteed annuity, either way)
Thanks!