Download or read book Modeling Partial Greeks of Variable Annuities with Dependence written by Guojun Gan and published by . This book was released on 2016 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: Dynamic hedging used to mitigate the financial risks associated with large portfolios of variable annuities requires calculating partial dollar deltas on major market indices. Metamodeling approaches have been proposed in the past few years to address the computational issues related to the calculation of partial dollar deltas. In this paper, we investigate whether the additional complication of modeling the dependence between the partial dollar deltas improves the accuracy of the metamodeling approaches. We use several copulas to model the dependence structures of the partial dollar deltas and conduct numerical experiments to compare different metamodels. Depiste the evidence of strong dependence in the estimated models, our numerical results show that modeling the dependence structures in the metamodels does not improve the accuracy of the estimations at the portfolio level. This is becasue the dependence between the partial dollar deltas is well captured by the covariates used in the marginal models. These findings suggest that we should focus on marginal models only and it is unnecessary to model dependence explicitly.