City Research Online

Abstract

This paper studies the dependence between coupled lives, i.e., the spouses’ dependence, across different generations, and its effects on prices of reversionary annuities in the presence of longevity risk. Longevity risk is represented via a stochastic mortality intensity. We find that a generation-based model is important, since spouses’ dependence decreases when passing from older generations to younger generations. The independence assumption produces quantifiable mispricing of reversionary annuities, with different effects on different generations. The research is conducted using a well-known dataset of double life contracts.

Publication Type:	Article
Publisher Keywords:	stochastic mortality; generation effect; reversionary annuity; copula; goodness-of-fit
Subjects:	H Social Sciences > HD Industries. Land use. Labor > HD61 Risk Management
Departments:	Bayes Business School > Actuarial Science & Insurance
SWORD Depositor:	Symplectic Administrator

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