equity indexed annuity

PSRs900

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“”An equity indexed annuity resembles a risk free rate plus a CALL option on stock returns.”“
Please can you explain why a call option….
 
If equity returns are below the risk-free rate you get the risk-free rate (technically, the minimum guaranteed payment), but if they’re above the risk-free rate you get the equity return. You have upside potential when returns are high without downside risk when they’re low, just like a call option.
 
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