Department of Mathematics , Shahid Beheshti University
Abstract
Pension funds problems are one of current major issues in many countries. Due to increased life expectancy and reduced mortality, pension funds faced with inability to meet financial obligation to the insured persons. Pension funds in the world are mainly of the type Defined Benefit (DB) that in this kind of systems all risks (investment risk, longevity risk, and etc.) are borne by the provider. Due to the intergenerational changes of the age of life expectancy and guarantee benefits of insured person in the DB plans, most of Pension funds have not provided financial obligation. One of the solutions for this problem is converting DB system to Defined Contribution (DC). In these systems, the risks of pension funds transferred to insured person. But, this plans also requires some guarantees for that person such as guaranteeing the return of investment. This kind of guarantees has investigated deeply in this paper so we design and price it in the form of option
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