The role of longevity bonds in optimal portfolios
- 作者：Francesco Menoncin
- 关键词：Longevity risk ; Dynamic programming
- 刊名：Insurance ; Mathematics and Economics
- 出版年：2008
- 期刊代码：25_01676687
- 类别：mt
- 出版时间：February 2008
- 卷：42
- 期：1
- 页码：343-358
- 文件大小：670 K
摘要
We study the optimal consumption and portfolio for an agent maximizing the expected utility of his intertemporal consumption in a financial market with: (i) a riskless asset, (ii) a stock, (iii) a bond as a derivative on the stochastic interest rate, and (iv) a longevity bond whose coupons are proportional to the population (stochastic) survival rate. With a force of mortality instantaneously uncorrelated with the interest rate (but not necessarily independent), we demonstrate that the wealth invested in the longevity bond must be taken from the ordinary bond and the riskless asset proportionally to the duration of the two bonds. This result is valid for both a complete and an incomplete financial market.