Annuities and Aggregate Mortality Uncertainty
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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- Leora Friedberg & Anthony Webb, 2006.
"Life is Cheap: Using Mortality Bonds to Hedge Aggregate Mortality Risk,"
NBER Working Papers
11984, National Bureau of Economic Research, Inc.
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University of Chicago Press, vol. 93(2), pages 223-247, April.
- Thomas Davidoff & Jeffrey R. Brown & Peter A. Diamond, 2005.
"Annuities and Individual Welfare,"
American Economic Review,
American Economic Association, vol. 95(5), pages 1573-1590, December.
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