Aggregate Mortality Risk and the Insurance Value of Annuities
AbstractFuture improvements in mortality are difficult to forecast. In this paper, we incorporate uncertainty about future mortality, or aggregate mortality risk, into an otherwise standard life cycle model with an intertemporal consumption-savings decision. The aggregate mortality process is calibrated based on European mortality series. We use the model to quantify the welfare cost of aggregate mortality risk and the extent to which individuals can insure themselves against it using life annuities with a constant payout stream.
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Bibliographic InfoPaper provided by The Research Institute of the Finnish Economy in its series Discussion Papers with number 1005.
Length: 15 pages
Date of creation: 2006
Date of revision:
Find related papers by JEL classification:
- G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
- D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-03-05 (All new papers)
- NEP-DGE-2006-03-05 (Dynamic General Equilibrium)
- NEP-FIN-2006-03-05 (Finance)
- NEP-IAS-2006-03-05 (Insurance Economics)
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