Return Guarantees with Delayed Payment

27 Pages Posted: 17 May 2006

See all articles by Klaus Sandmann

Klaus Sandmann

University of Bonn - The Bonn Graduate School of Economics

Antje Brigitte Mahayni

Mercator School of Management


A unit-linked insurance contract can be formulated in terms of a guaranteed amount together with a fraction of a positive excess return of a benchmark portfolio. Normally, the excess return is determined annually and accumulated until the maturity of the contract. The accumulation factor which is granted with respect to the delayed payments can either be deterministic or equal to the (stochastic) bank account. It turns out that the common choice of a deterministic accumulation factor gives rise to problems concerning the pricing and the risk management of the insurance contract.

Keywords: Periodic return guarantees, life insurance, robust hedging

JEL Classification: G13, G22, G23

Suggested Citation

Sandmann, Klaus and Mahayni, Antje B., Return Guarantees with Delayed Payment. German Economic Review, 2006, Available at SSRN:

Klaus Sandmann (Contact Author)

University of Bonn - The Bonn Graduate School of Economics ( email )

Adenauerallee 24-26
Bonn, D-53113

Antje B. Mahayni

Mercator School of Management ( email )

Lotharstraße 65
Duisburg, Nordrhein-Westfalen 47057

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