Justin van de Ven (National Institute of Economic and Social Research) Martin Weale (National Institute of Economic and Social Research)
Abstract
This 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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Publisher Info
Paper provided by ESRC World Economy and Finance Research Programme, Birkbeck, University of London in its series WEF Working Papers with number
0027.