Annuities and Aggregate Mortality Uncertainty
AbstractThis paper explores the effect of aggregate mortality risk on thepricing of annuities. It uses a two-period model; in the second period people face a constant but intiially unknown risk of death. Old people can either carry the aggregat emortlaity risk for themselves or buy annuities which are sold by young people. A market-clearing price for such annuties is established. It is found that old people would, given the choice, decide to carry a considerable part of aggregate mortality risk for themselves.
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Bibliographic InfoPaper provided by ESRC World Economy and Finance Research Programme, Birkbeck, University of London in its series WEF Working Papers with number 0027.
Date of creation: Mar 2007
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-12-08 (All new papers)
- NEP-DGE-2007-12-08 (Dynamic General Equilibrium)
- NEP-HEA-2007-12-08 (Health Economics)
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- Thomas Davidoff & Jeffrey R. Brown & Peter A. Diamond, 2005.
"Annuities and Individual Welfare,"
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American Economic Association, vol. 95(5), pages 1573-1590, December.
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