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Optimal post-retirement consumption and portfolio choices with idiosyncratic individual mortality force and awareness of mortality risk

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  • Lei He
  • Shuling Tian

Abstract

Considering the effects of mortality risk awareness and idiosyncratic mortality force on economic decision-making of a retiree, we study the optimal post-retirement consumption and portfolio problem with mortality risk awareness, idiosyncratic individual mortality force. We derive a closed optimal strategy in a complete financial market under stochastic interest rate and national population mortality force by martingale method. A numerical illustration is performed, and shows that mortality risk awareness and idiosyncratic individual mortality force have important effects on the consumption and investment of retiree. Especially, the demand of longevity bond is significantly affected by mortality risk awareness.

Suggested Citation

  • Lei He & Shuling Tian, 2023. "Optimal post-retirement consumption and portfolio choices with idiosyncratic individual mortality force and awareness of mortality risk," Communications in Statistics - Theory and Methods, Taylor & Francis Journals, vol. 52(7), pages 2259-2275, April.
    • Handle: RePEc:taf:lstaxx:v:52:y:2023:i:7:p:2259-2275
    DOI: 10.1080/03610926.2021.1949473
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