MORE ON THE ORIGIN OF FINANCIAL ECONOMICS: EARLY CONTRIBUTIONS TO JOINT LIFE ANNUITY VALUATION

Geoffrey Poitras

Journal of the History of Economic Thought, 2025, vol. 47, issue 3, 339-362

Abstract: The origin of modern financial economics can be traced to early discounted expected value solutions for the price of life annuities. In contrast to the single life annuity valuations attributed to Jan de Witt and Edmond Halley, the computational complexity of joint life annuity valuation posed difficulties. Following a brief review of various joint life annuity specifications, a history of joint life annuity issuance and valuation in northern Europe from the thirteenth to the mid-eighteenth centuries is provided. With this background, the 1671 correspondence from de Witt to Jan Hudde on possible methods for valuing joint life annuities is detailed. These methods are contrasted with the geometric method described in Halley (1693), providing impetus for examination of the analytical approximations developed by Abraham de Moivre and Thomas Simpson.

Date: 2025
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