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Fear of ruin and longevity enhancing investment

  • EECKHOUDT, Louis


  • PESTIEAU, Pierre

    (Université catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE))

Rectangularization of the survival probability seems to be an ongoing process. It results from a higher concentration of the ages at death; but it can be reversed by a continuous increase in the limit of life time. In this paper, we assume that these two factors are endogenous and we show that risk averse decision makers exhibit a bias towards rectangularization. More specifically, the importance of the bias depends upon the intensity of the "fear of ruin" which is another measure of the degree of absolute risk aversion.

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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2007032.

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Date of creation: 01 May 2007
Date of revision:
Handle: RePEc:cor:louvco:2007032
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