Life-cycle planning with ambiguous economics and mortality risks

Record image
Collection: Articles
Title: Life-cycle planning with ambiguous economics and mortality risks / Yang Shen and Jianxi Su
Author: Shen, Yang
Notes: Sumario: In this article, we study the strategic planning problem for a wage earner in a life-cycle model with stochastic lifetime. The wage earner aims to decide on the optimal portfolio choice, consumption, and insurance buying rules over the preretirement and postretirement phases. In addition, the wage earner is concerned about the uncertainty of economic and mortality models. In order to address the concern, the wage earner considers the optimal decisions under the worst-case scenario selected from a set of plausible alternative models. We find that the economic ambiguity and mortality ambiguity have substantially different impacts on the optimal decisions. Specifically, though the worst-case economic scenario depends only on the economic environment, the design of the worst-case mortality scenario is determined by the intricate interplays between the wage earner's personal profile (e.g., health status, income dynamics, risk aversion, etc.) and the evolution of the economic environment. Moreover, the study of mortality ambiguity is also closely related to the value of statistical life, which can be positive and negative in general. Such a complicated theoretical structure underlying the study of mortality ambiguity can sometimes even overturn the direction of its impacts on the optimal decisions. Our article highlights the importance as well as the complexity for modeling ambiguity aversion in optimal planning studies, which desire more serious and critical treatments from the community of actuarial professionals.
Related records: En: North American actuarial journal. - Schaumburg : Society of Actuaries, 1997- = ISSN 1092-0277. - 02/12/2019 Tomo 23 Número 4 - 2019 , p. 598- 625
Materia / lugar / evento: Análisis del ciclo de vida Coste del riesgo Mortalidad Economía Cartera de seguros Seguro de personas Asegurados Modelos de planificación Actuarios Estados Unidos
Other authors: Su, Jianxi
Other categories: 34
Rights: In Copyright (InC): http://rightsstatements.org/vocab/InC/1.0/
See issue detail