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Annuities and Aggregate Mortality Uncertainty

Author

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  • 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.

Suggested Citation

  • Justin van de Ven & Martin Weale, 2007. "Annuities and Aggregate Mortality Uncertainty," WEF Working Papers 0027, ESRC World Economy and Finance Research Programme, Birkbeck, University of London.
    • Handle: RePEc:wef:wpaper:0027
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    References listed on IDEAS

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