  A variable annuity is an equity-linked financial product typically offered by
insurance companies. The policyholder makes an upfront payment to the insurance
company and, in return, the insurer is required to make a series of payments
starting at an agreed upon date. For a higher premium, many insurance companies
offer additional guarantees or options which protect policyholders from various
market risks. This research is centered around two of these options: the
guaranteed minimum income benefit (GMIB) and the reset option. The sensitivity
of various parameters on the value of the GMIB is explored, particularly the
guaranteed payment rate set by the insurer. Additionally, a critical value for
future interest rates is calculated to determine the rationality of exercising
the reset option. This will be able to provide insight to both the policyholder
and policy writer on how their future projections on the performance of the
stock market and interest rates should guide their respective actions of
exercising and pricing variable annuity options. This can help provide details
into the value of adding options to a variable annuity for companies that are
looking to make variable annuity policies more attractive in a competitive
market.
