Annuity Uncertainty with Stochastic Mortality and Interest Rates

Xiaoming Liu

North American Actuarial Journal, 2013, vol. 17, issue 2, 136-152

Abstract: Risk analysis in actuarial science has shifted its focus from diversifiable risk to systematic risk in the last 20 years or so. This article contributes further in this direction by proposing the concept of annuity rate to take account of systematic risk inherent in annuity products. The annuity rate is the conditional expectation of the annuity’s future payments, given the future paths of mortality and interest rates. We provide an empirical study to investigate the impact of the two systematic risk factors on the distribution of the annuity rate. In particular, we adopt the Lee-Carter and the Cairns-Blake-Dowd models for mortality risk, and the one-factor and two-factor CIR models for interest risk. Monte Carlo simulation is used to provide numerical illustrations of sensitivity analysis of the annuity rate and of risk assessment of a guaranteed annuity option.

Date: 2013
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://hdl.handle.net/10.1080/10920277.2013.795481 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:uaajxx:v:17:y:2013:i:2:p:136-152

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/uaaj20

DOI: 10.1080/10920277.2013.795481

Access Statistics for this article

North American Actuarial Journal is currently edited by Kathryn Baker

More articles in North American Actuarial Journal from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().