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Annuities, Bequests and Portfolio Diversification

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  • D'ALBIS Hippolyte
  • THIBAULT Emmanuel

Abstract

In this article, the diversification motives of the demand for annuities is analyzed. Using a model allowing for the uncertainty of both the human life length and the interest rate, the Decision Maker is supposed to choose an optimal portfolio to maximize a bequest. Conditions under which an increase in the risk of bond returns increase the demand for annuities are proposed and discussed. Moreover, it is shown that, contrary to previous claims, more risk adversion is associated with a lower demand for annuities.
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Suggested Citation

  • D'ALBIS Hippolyte & THIBAULT Emmanuel, 2009. "Annuities, Bequests and Portfolio Diversification," LERNA Working Papers 09.14.290, LERNA, University of Toulouse.
    • Handle: RePEc:ler:wpaper:09.14.290
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    References listed on IDEAS

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    1. Visite guidée au coeur des travaux du Meilleur jeune économiste 2012 (1/2)
      by Matthieu Solignac in Regards croisés sur l'économie on 2012-05-29 00:26:09

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    Cited by:

    1. Pestieau, Pierre & Ponthiere, Gregory, 2016. "Longevity Variations And The Welfare State," Journal of Demographic Economics, Cambridge University Press, vol. 82(2), pages 207-239, June.

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    More about this item

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies

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