Journal of Applied Mathematics (Jan 2011)
Valuation of Inflation-Linked Annuities in a Lévy Market
Abstract
We study the problem of pricing an inflation adjusted annuity in a forward rates market with jumps. Since the market will be incomplete, we use the minimal fq-martingale measure Qq which we use for computing discounted expectations. We give explicit results for Qq together with explicit results for the price of the annuity.