Impact of Simultaneous Jumps in Mortality and Assets Market on GMDB Rider

This study investigates the impact of jointly modeling jumps in asset prices and mortality rates on the valuation of insurance guarantees. Mortality dynamics are specified using two extended frameworks based on the classical Lee–Carter model, with and without the inclusion of jump components. Financial asset returns are modeled using Merton jump–diffusion processes. In the proposed specification, asset prices evolve according to a two–regime Merton model, where the regimes correspond to pandemic and non–pandemic market conditions. Using historical mortality data for the U.S. population and financial market data from the S&P 500 index, we evaluate the pricing implications for a Guaranteed Minimum Death Benefit (GMDB) rider. Contract values and Greeks are computed across multiple issue ages and policy maturities. The empirical results highlight the importance of accounting for simultaneous mortality and market jumps, and demonstrate that their interaction has a material effect on the valuation of GMDB products.