Optimal gradual annuitization : quantifying the costs of switching to annuities
- We compute the optimal dynamic asset allocation policy for a retiree with Epstein-Zin utility. The retiree can decide how much he consumes and how much he invests in stocks, bonds, and annuities. Pricing the annuities we account for asymmetric mortality beliefs and administration expenses. We show that the retiree does not purchase annuities only once but rather several times during retirement (gradual annuitization). We analyze the case in which the retiree is restricted to buy annuities only once and has to perform a (complete or partial) switching strategy. This restriction reduces both the utility and the demand for annuities.
| Author: | Wolfram J. Horneff, Raimond MaurerORCiDGND, Michael Stamos |
|---|---|
| URN: | urn:nbn:de:hebis:30-43610 |
| Parent Title (English): | Universität Frankfurt am Main. Fachbereich Wirtschaftswissenschaften: [Working paper series / Finance and accounting] Working paper series, Finance & Accounting ; No. 174 |
| Series (Serial Number): | Working paper series / Johann-Wolfgang-Goethe-Universität Frankfurt am Main, Fachbereich Wirtschaftswissenschaften : Finance & Accounting (174) |
| Publisher: | Univ., Fachbereich Wirtschaftswiss. |
| Place of publication: | Frankfurt am Main |
| Document Type: | Working Paper |
| Language: | English |
| Year of Completion: | 2007 |
| Year of first Publication: | 2007 |
| Publishing Institution: | Universitätsbibliothek Johann Christian Senckenberg |
| Release Date: | 2007/04/21 |
| Tag: | annuities; dynamic asset allocation; insurance; pensions; portfolio choice; retirement; retirement policies |
| GND Keyword: | Rentner; Asset-Backed Security; Portfoliomanagement |
| Page Number: | 25 |
| HeBIS-PPN: | 185748937 |
| Institutes: | Wirtschaftswissenschaften / Wirtschaftswissenschaften |
| Dewey Decimal Classification: | 3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft |
| Licence (German): |  Deutsches Urheberrecht |
