TY  - RPRT
UR  - http://eprints.imtlucca.it/2666/
TI  - Longevity assets and pre-retirement consumption/portfolio
decisions
AV  - public
KW  - JEL codes: C61; G11 - Keywords: longevity risk
KW  -  pre-retirement savings
KW  -  consumption/portfolio choices
KW  - 
HARA preferences.
Y1  - 2015/05//
N2  - 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. 
M1  - imt_eic_working_paper
A1  - Menoncin, Francesco
A1  - Regis, Luca
PB  - IMT Institute for Advanced Studies
SN  - 2279-6894
EP  - 43
ID  - eprints2666
ER  -