Optimal post-retirement consumption and portfolio choices with idiosyncratic individual mortality force and awareness of mortality risk

Lei He and Shuling Tian

Communications in Statistics - Theory and Methods, 2023, vol. 52, issue 7, 2259-2275

Abstract: Considering the effects of mortality risk awareness and idiosyncratic mortality force on economic decision-making of a retiree, we study the optimal post-retirement consumption and portfolio problem with mortality risk awareness, idiosyncratic individual mortality force. We derive a closed optimal strategy in a complete financial market under stochastic interest rate and national population mortality force by martingale method. A numerical illustration is performed, and shows that mortality risk awareness and idiosyncratic individual mortality force have important effects on the consumption and investment of retiree. Especially, the demand of longevity bond is significantly affected by mortality risk awareness.

Date: 2023
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DOI: 10.1080/03610926.2021.1949473

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