Purchasing an Annuity: Now or Later? The Role of Interest Rates [extrait BMI 142]
Version numérique PDF
This paper investigates whether the option to delay annuitization in times of low interest rates has value for retirees. The retiree who chooses to wait bets on a fall in the annuity price brought about by a rise in the interest rates; the cost of such a bet is the loss of the mortality credit during the waiting period. We show that an investor who can only invest in bonds during the waiting period will never find waiting ex-ante profitable if annuities are fairly priced, because waiting is costly and buying a fairly priced annuity is a zero-npv project. In contrast, an investor allowed to invest part of her wealth in the stock market will be able to attain more consumption on average, but at the cost of a sharp increase in risk. A retiree may choose to wait, however, if she believes her views are not priced in the term structure. For such a retiree, waiting is optimal if the expected increase in the interest rate is larger than the square of the hazard rate.Keywords: Annuities; Interest Rates; Financial Crises.JEL Codes: G21; G22.
Auteurs :Markwat Thijs Extrait de la revue BMI 142
Reference
BMI142-1127338
Condition
New
16 other products in the same category:
Previous
Availability: Out of stock
Sommaire
Articles
Short-term Impacts of the 2004 Indian Ocean Tsunami on Stock Markets: A DCC-GARCH Analysis
Equity Option Listing and Underlying Market Quality: Evidence from a Price Duration Model
Does the Catering Theory of Dividend Apply to the French Listed Firms?
Availability: Out of stock
Availability: Out of stock
Availability: Out of stock
Availability: Out of stock
Availability: Out of stock
Availability: Out of stock
Availability: Out of stock
Sommaire
Articles
Purchasing an Annuity: Now or Later? The Role of Interest Rates
Does Corporate Social Performance Really Improve Corporate Financial Performance?
Does the Market Value the Social Dimension? International Evidence
When Financial Derivatives can be Applied to the Real Economy – The Case of Exotic Options in Corporate Finance
Availability: Out of stock
Availability: Out of stock
Sommaire
Articles
Active Portfolio Management with Conditional Tracking Error
Bank Acquisitiveness and Financial Crisis Vulnerability
Is Macroeconomic Announcement News Priced?
Focus On
Basel III and Bank Liquidity Creation
Availability: Out of stock
Availability: Out of stock
Risk-Based and Factor Investing
Expected Credit Loss vs. Credit Value Adjustment: A Comparative Analysis
Analyst Earnings Forecasts, Individual Investors’ Expectations and Trading Volume
Changing Dynamic Relationships between Stock and Bond Markets in Crises
Do Regulatory and Supervisory Reforms Affect European Bank Stability
Availability: Out of stock
Availability: Out of stock
Availability: Out of stock
Availability: Out of stock
Sommaire
Articles
How Risky are Low-Risk Hedge Funds?
Hedge Funds Managerial Skill Revisited: A Quantile Regression Approach
Multi-Asset Seasonality and Trend-Following Strategies
New Insight on the Performance of Equity Long/short Investment Styles
Availability: Out of stock
Sommaire
Articles
Short-term Impacts of the 2004 Indian Ocean Tsunami on Stock Markets: A DCC-GARCH Analysis
Equity Option Listing and Underlying Market Quality: Evidence from a Price Duration Model
Does the Catering Theory of Dividend Apply to the French Listed Firms?
Availability: Out of stock
Availability: Out of stock
Availability: Out of stock
Availability: Out of stock
Availability: Out of stock
Availability: Out of stock
Availability: Out of stock
Sommaire
Articles
Purchasing an Annuity: Now or Later? The Role of Interest Rates
Does Corporate Social Performance Really Improve Corporate Financial Performance?
Does the Market Value the Social Dimension? International Evidence
When Financial Derivatives can be Applied to the Real Economy – The Case of Exotic Options in Corporate Finance
Availability: Out of stock
Availability: Out of stock
Sommaire
Articles
Active Portfolio Management with Conditional Tracking Error
Bank Acquisitiveness and Financial Crisis Vulnerability
Is Macroeconomic Announcement News Priced?
Focus On
Basel III and Bank Liquidity Creation
Availability: Out of stock
Availability: Out of stock
Risk-Based and Factor Investing
Expected Credit Loss vs. Credit Value Adjustment: A Comparative Analysis
Analyst Earnings Forecasts, Individual Investors’ Expectations and Trading Volume
Changing Dynamic Relationships between Stock and Bond Markets in Crises
Do Regulatory and Supervisory Reforms Affect European Bank Stability
Availability: Out of stock
Availability: Out of stock
Availability: Out of stock
Availability: Out of stock
Sommaire
Articles
How Risky are Low-Risk Hedge Funds?
Hedge Funds Managerial Skill Revisited: A Quantile Regression Approach
Multi-Asset Seasonality and Trend-Following Strategies
New Insight on the Performance of Equity Long/short Investment Styles
Availability: Out of stock
Sommaire
Articles
Short-term Impacts of the 2004 Indian Ocean Tsunami on Stock Markets: A DCC-GARCH Analysis
Equity Option Listing and Underlying Market Quality: Evidence from a Price Duration Model
Does the Catering Theory of Dividend Apply to the French Listed Firms?
Availability: Out of stock
Availability: Out of stock
Availability: Out of stock
Availability: Out of stock
Next
This website uses cookies to ensure you get the best experience on our website
Got it!