Consumption-investment problems with stochastic mortality risk : [version 3 march 2014]
- I numerically solve realistically calibrated life cycle consumption-investment problems in continuous time featuring stochastic mortality risk driven by jumps, unspanned labor income as well as short-sale and liquidity constraints and a simple insurance. I compare models with deterministic and stochastic hazard rate of death to a model without mortality risk. Mortality risk has only minor effects on the optimal controls early in the life cycle but it becomes crucial in later years. A diffusive component in the hazard rate of death has no significant impact, whereas a jump component is desired by the agent and influences optimal controls and wealth evolution. The insurance is used to ensure optimal bequest such that there is no accidental bequest. In the absence of the insurance, the biggest part of bequest is accidental.
| Author: | Lorenz S. Schendel |
|---|---|
| URN: | urn:nbn:de:hebis:30:3-333127 |
| URL: | http://ssrn.com/abstract=2403776 |
| DOI: | https://doi.org/10.2139/ssrn.2403776 |
| Parent Title (German): | SAFE working paper series ; No. 43 |
| Series (Serial Number): | SAFE working paper (43) |
| Publisher: | SAFE |
| Place of publication: | Frankfurt am Main |
| Document Type: | Working Paper |
| Language: | English |
| Year of Completion: | 2014 |
| Year of first Publication: | 2014 |
| Publishing Institution: | Universitätsbibliothek Johann Christian Senckenberg |
| Release Date: | 2014/03/21 |
| Tag: | Health jumps; Insurance; Labor income risk; Portfolio choice; Stochastic mortality risk |
| Issue: | version 3 march 2014 |
| Edition: | Version: 3 März 2014 |
| HeBIS-PPN: | 34892187X |
| Institutes: | Wirtschaftswissenschaften / Wirtschaftswissenschaften |
| Wissenschaftliche Zentren und koordinierte Programme / House of Finance (HoF) | |
| Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS) | |
| Wissenschaftliche Zentren und koordinierte Programme / Sustainable Architecture for Finance in Europe (SAFE) | |
| Dewey Decimal Classification: | 3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft |
| Sammlungen: | Universitätspublikationen |
| Licence (German): |  Deutsches Urheberrecht |
