Annuities and Aggregate Mortality Uncertainty

Justin van de Ven and Martin Weale ()

No 27, WEF Working Papers from ESRC World Economy and Finance Research Programme, Birkbeck, University of London

Abstract: This paper explores the effect of aggregate mortality risk on thepricing of annuities. It uses a two-period model; in the second period people face a constant but intiially unknown risk of death. Old people can either carry the aggregat emortlaity risk for themselves or buy annuities which are sold by young people. A market-clearing price for such annuties is established. It is found that old people would, given the choice, decide to carry a considerable part of aggregate mortality risk for themselves.

Date: 2007-03
New Economics Papers: this item is included in nep-dge and nep-hea
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