Longevity-linked assets and pre-retirement consumption/portfolio decisions

摘要

We solve the consumption investment problem of an agent facing a stochastic mortality intensity. The investment set includes a longevity-linked asset, as a derivative on the force of mortality. In a complete and frictionless market, we derive a closed form solution when the agent has Hyperbolic Absolute Risk Aversion preferences and a fixed financial horizon. Our calibrated numerical analysis on US data shows that individuals optimally invest a large fraction of their wealth in longevity-linked assets in the pre retirement phase, because of their need to hedge against stochastic fluctuations in their remaining lifetime at retirement. (C) 2017 Elsevier B.V. All rights reserved.