Optimal Smooth Consumption and Annuity Design

Kenneth Bruhn; Mogens Steffensen

doi:10.1016/j.jbankfin.2013.03.015

Optimal Smooth Consumption and Annuity Design

Kenneth Bruhn, Mogens Steffensen

Institut for Matematiske Fag

8 Citationer (Scopus)

Abstract

We propose an optimization criterion that yields extraordinary consumption smoothing compared to the well known results of the life-cycle model. Under this criterion we solve the related consumption and investment optimization problem faced by individuals with preferences for intertemporal stability in consumption. We find that the consumption and investment patterns demanded under the optimization criterion is in general offered as annuity benefits from products in the class of ‘Formula Based Smoothed Investment-Linked Annuities’.

Originalsprog	Engelsk
Tidsskrift	Journal of Banking & Finance
Vol/bind	37
Udgave nummer	8
Sider (fra-til)	2693-2701
ISSN	0378-4266
DOI	https://doi.org/10.1016/j.jbankfin.2013.03.015
Status	Udgivet - aug. 2013

Adgang til dokumentet

10.1016/j.jbankfin.2013.03.015

Citationsformater

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title = "Optimal Smooth Consumption and Annuity Design",

abstract = "We propose an optimization criterion that yields extraordinary consumption smoothing compared to the well known results of the life-cycle model. Under this criterion we solve the related consumption and investment optimization problem faced by individuals with preferences for intertemporal stability in consumption. We find that the consumption and investment patterns demanded under the optimization criterion is in general offered as annuity benefits from products in the class of {\textquoteleft}Formula Based Smoothed Investment-Linked Annuities{\textquoteright}.",

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AB - We propose an optimization criterion that yields extraordinary consumption smoothing compared to the well known results of the life-cycle model. Under this criterion we solve the related consumption and investment optimization problem faced by individuals with preferences for intertemporal stability in consumption. We find that the consumption and investment patterns demanded under the optimization criterion is in general offered as annuity benefits from products in the class of ‘Formula Based Smoothed Investment-Linked Annuities’.

U2 - 10.1016/j.jbankfin.2013.03.015

DO - 10.1016/j.jbankfin.2013.03.015

M3 - Journal article

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