Optimal Deferred Life Annuities to Minimize the Probability of Lifetime Ruin

Erhan Bayraktar and Virginia R. Young

Papers from arXiv.org

Abstract: We find the minimum probability of lifetime ruin of an investor who can invest in a market with a risky and a riskless asset and can purchase a deferred annuity. Although we let the admissible set of strategies of annuity purchasing process to be increasing adapted processes, we find that the individual will not buy a deferred life annuity unless she can cover all her consumption via the annuity and have enough wealth left over to sustain her until the end of the deferral period.

Date: 2007-03, Revised 2007-10
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