Modeling taxation in GMWB Variable Annuities has been frequently neglected but accounting for it can significantly improve the explanation of the withdrawal dynamics and lead to a better modeling of the financial cost of these insurance products. The importance of including a model of taxation has first been observed by Moenig and Bauer while considering the Black-Scholes model to describe the underlying security. Anyway , GMWB are long term products and thus accounting for stochastic interest rate has a relevant impact on both the financial evaluation and the policy holder behavior, as observed by Gouden\`ege et al.  . In this paper we investigate the impact of these two elements together on GMWB evaluation. To this aim  we develop a numerical framework which allows one to efficiently compute the fair fee value of a contract. Results show that accounting for both taxation and stochastic interest rate has determinant effects on the behavior of the policy holder and on the cost of GMWB contracts  .
Modeling taxation of Variable Annuities has been frequently neglected but accounting for it can significantly improve the explanation of the withdrawal dynamics and lead to a better modeling of the financial cost of these insurance products. The importance of including a model for taxation has first been observed by Moenig and Bauer (2016) while considering a GMWB Variable Annuity. In particular, they consider the simple Black-Scholes dynamics to describe the underlying security. Nevertheless , GMWB are long term products and thus accounting for stochastic interest rate has relevant effects on both the financial evaluation and the policy holder behavior, as observed by Gouden\`ege et al. (2018) . In this paper we investigate the outcomes of these two elements together on GMWB evaluation. To this aim , we develop a numerical framework which allows one to efficiently compute the fair value of a policy. Numerical results show that accounting for both taxation and stochastic interest rate has a determinant impact on the withdrawal strategy and on the cost of GMWB contracts . In addition, it can explain why these products are so popular with people looking for a protected form of investment for retirement .
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