Advanced Search
MyIDEAS: Login

A Contingent Claim Analysis of Suicide

Contents:

Author Info

  • Shin S. Ikeda

    (National Graduate Institute for Policy Studies)

Registered author(s):

    Abstract

    An option-theoretic model of suicide in the continuous time framework is proposed. Given completeness of the financial market and the associated contingent claim argument, the value of human capital consistent with the no-arbitrage principle is determined as the expected, discounted, present value of the future wage stream under the risk-neutral probability measure. The suicide option - the right but not the obligation to commit suicide - is modelled as an American put option with this human capital stock and a certain reference level of human capital as the underlier and strike price, respectively. The value of underlier falling short of the srtike price doet not induce the option holder's immediate suicide because of the option value to postpone such a fatal and irreversible decision. This value, the delayed exercise premium, is given in a near closed form up to a deterministic exercise boundary. The nearly closed-form nature of this boundry allows one to calibrate the model to the real suicide rates among Japanese male workers from 1998 to 2009. The calibrated value of the strike price roughly amounts to the perpetual annuity value of the 90 percentage of the initial wage earned as of the new entry into the labor market, with the coupon rate given by the spread in market prices of risk between financial and labor market.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.grips.ac.jp/r-center/wp-content/uploads/13-05.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by National Graduate Institute for Policy Studies in its series GRIPS Discussion Papers with number 13-05.

    as in new window
    Length: 26 pages
    Date of creation: May 2013
    Date of revision:
    Handle: RePEc:ngi:dpaper:13-05

    Contact details of provider:
    Postal: 7-22-1 Roppongi, Minato-ku, Tokyo, Japan 106-8677
    Phone: +81-(0)3-6439-6000
    Fax: +81-(0)3-6439-6010
    Web page: http://www.grips.ac.jp/r-center/en/discussion_papers/
    More information through EDIRC

    Related research

    Keywords:

    This paper has been announced in the following NEP Reports:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Merton, Robert C, 1998. "Applications of Option-Pricing Theory: Twenty-Five Years Later," American Economic Review, American Economic Association, vol. 88(3), pages 323-49, June.
    2. Luca Benzoni & Pierre Collin-Dufresne & Robert S. Goldstein, 2007. "Portfolio Choice over the Life-Cycle when the Stock and Labor Markets Are Cointegrated," Journal of Finance, American Finance Association, vol. 62(5), pages 2123-2167, October.
    3. Chan, Leo & Lien, Donald, 2010. "The value of planned death," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 39(6), pages 692-695, December.
    4. Mary C. Daly & Daniel J. Wilson & Norman J. Johnson, 2007. "Relative status and well-being: evidence from U.S. suicide deaths," Working Paper Series 2007-12, Federal Reserve Bank of San Francisco.
    5. Luca Benzoni & Pierre Collin-Dufresne & Robert S. Goldstein, 2007. "Portfolio choice over the life-cycle when the stock and labor markets are cointegrated," Working Paper Series WP-07-11, Federal Reserve Bank of Chicago.
    6. Hamermesh, Daniel S & Soss, Neal M, 1974. "An Economic Theory of Suicide," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 83-98, Jan.-Feb..
    7. Zvi Bodie & J�r�me Detemple & Marcel Rindisbacher, 2009. "Life-Cycle Finance and the Design of Pension Plans," Annual Review of Financial Economics, Annual Reviews, vol. 1(1), pages 249-286, November.
    8. McDonald, Robert & Siegel, Daniel, 1986. "The Value of Waiting to Invest," The Quarterly Journal of Economics, MIT Press, vol. 101(4), pages 707-27, November.
    9. Bodie, Zvi & Detemple, Jerome B. & Otruba, Susanne & Walter, Stephan, 2004. "Optimal consumption-portfolio choices and retirement planning," Journal of Economic Dynamics and Control, Elsevier, vol. 28(6), pages 1115-1148, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. The option of suicide
      by Economic Logician in Economic Logic on 2013-08-08 14:45:00

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:ngi:dpaper:13-05. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.