Tag: annuity
Abstract Using the Lee-Carter mortality model, we quantify aggregate mortality risk, the risk that annuitants might live longer than predicted by the model. We calculate that a markup of 4.3 percent on an annuity premium, or else shareholders’ capital equal to 4.3 percent of the expected present value of annuity payments, would reduce the probability…
Abstract This paper advances the theory of annuity demand. First, we derive sufficient conditions under which complete annuitization is optimal, showing that this well-known result holds true in a more general setting than in Yaari (1965). Specifically, when markets are complete, sufficient conditions need not impose exponential discounting, intertemporal separability or the expected utility axioms…
