Demographic risk transfer: is it worth for annuity providers? ICER Working Paper

Luciano, Elisa and Regis, Luca Demographic risk transfer: is it worth for annuity providers? ICER Working Paper. Working Paper #24/2012

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Abstract

Longevity risk transfer is a popular choice for annuity providers such as pension funds. This paper formalizes the trade-off between the cost and the risk relief of such choice, when the annuity provider uses value-at-risk to assess risk. Using first-order approximations we show that, if the transfer is fairly priced and the aim of the fund is to maximize returns, the funds' alternatives can be represented in the plane expected return-VaR. We build a risk-return frontier, along which the optimal transfer choices of the fund are located and calibrated it to the 2010 UK annuity and bond market.

Item Type:	Working Paper (Working Paper)
Subjects:	H Social Sciences > HB Economic Theory
Research Area:	Economics and Institutional Change
Depositing User:	Ms T. Iannizzi
Date Deposited:	27 Sep 2013 12:18
Last Modified:	27 Sep 2013 12:18
URI:	http://eprints.imtlucca.it/id/eprint/1804

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