In this paper we derive a market value for Guaranteed Annuity Optionusing martingale modeling techniques. Furthermore, we show how to construct a static replicating portfolio of vanillainterest rate swaptions that replicates the Guaranteed Annuity Option. Finally, we illustrate with historical...

This technical note gives implementation notes for estimating the Koijen-Nijman-Werker model from historical data based on a Kalman filter. We provide an independent derivation of the KNW model. We propose a different implementation of the state-space formulation of the KNW model and we test the...