Fixed-Index Annuity Return and Risk Analysis as Long-Term Investment
Document Type
Article
Publication Date
3-14-2017
Abstract
This paper examines the risk and return of a fixed-index annuity (FIA) with an enhanced model framework that incorporates correlated market variables and changing participation rates. The performance of stock/bond portfolios is compared with that of two hypothetical FIAs (10-year monthly averaging and point-to-point) for a 10-year holding period. FIAs exhibited lower shortfall risk due to their structure. A stock/bond mix of 30/70 achieves higher risk-adjusted returns but slightly lower absolute return and higher tail risk. However, interest rate level and stock market volatility both affect the performance of FIAs.
Recommended Citation
Zhixin Wu, Lei Liang, Huong Dao, and Linh Nguyen. 2014. “Fixed-Index Annuity Return and Risk Analysis as Long-Term Investment.” Journal of Financial Service Professionals 68 (2): 71–84. https://search.ebscohost.com/login.aspx?direct=true&AuthType=ip,sso&db=bth&AN=94827996&site=eds-live.
