relation: http://eprints.imtlucca.it/2666/
title: Longevity assets and pre-retirement consumption/portfolio  decisions
creator: Menoncin, Francesco
creator: Regis, Luca
subject: HB Economic Theory
description: We derive a closed form solution for the optimal consumption/investment problem of an agent whose force of mortality is stochastic and whose financial horizon coincides with a fixed retirement date. The investment set includes a longevity asset, as a derivative on the force of mortality. We explore the optimal choices of a representative agent having Hyperbolic Absolute Risk Aversion preferences on both consumption and final  wealth. Our numerical analysis shows that individuals optimally invest a large fraction of their wealth in the longevity asset. In our base scenario, calibrated on real world data, a 60-year old male retiring after 5 years should invest around 88% of his wealth in the longevity asset. Such a percentage decreases as time to retirement decreases. We explore sensitivity of our results to market and individual characteristics. 
publisher: IMT Institute for Advanced Studies
date: 2015-05
type: Working Paper
type: NonPeerReviewed
format: application/pdf
language: en
rights: cc_by_nd
identifier: http://eprints.imtlucca.it/2666/2/File%20unico.pdf
identifier:   Menoncin, Francesco and Regis, Luca  Longevity assets and pre-retirement consumption/portfolio decisions.  EIC working paper series  #2/2015    IMT Institute for Advanced Studies    ISSN 2279-6894.