eprintid: 2666
rev_number: 14
eprint_status: archive
userid: 69
dir: disk0/00/00/26/66
datestamp: 2015-05-05 07:54:32
lastmod: 2015-05-05 08:22:47
status_changed: 2015-05-05 07:54:32
type: monograph
metadata_visibility: show
creators_name: Menoncin, Francesco
creators_name: Regis, Luca
creators_id: 
creators_id: luca.regis@imtlucca.it
title: Longevity assets and pre-retirement consumption/portfolio
decisions
ispublished: pub
subjects: HB
divisions: EIC
full_text_status: public
monograph_type: imt_eic_working_paper
keywords: JEL codes: C61; G11 - Keywords: longevity risk, pre-retirement savings, consumption/portfolio choices,
HARA preferences.
abstract: 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. 
date: 2015-05
date_type: published
number: 2
publisher: IMT Institute for Advanced Studies
pages: 43
institution: IMT Institute for Advanced Studies Lucca
issn: 2279-6894
citation:   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.      
document_url: http://eprints.imtlucca.it/2666/2/File%20unico.pdf