Valuation of variable annuity contracts with cliquet options in Asia markets

Variable annuities are very appealing to the investor. For example, in United States, sales volume on variable annuities grew to a record 184 billion in calendar year 2006. However, due to their complicated payoff structure, their valuation and risk management are challenges to the insurers. In this paper, we study a variable annuity contract with cliquet options in Asia markets. The contact has quanto feature. We propose an efficient Monte Carlo method to value the contract. Numerical examples suggest our approach is quite efficient.