According to Yaari (1965), the best protection for the individual against the risk of ruin is offered by the (traditional) annuity product, which provides a lifetime income stream, independent of interest rates, the lifetime of the individual and the average lifetime of the population. [...] 2 The products and the structure of the pool 2.1 The products and the related mortality assumptions The specific labels given to the several types of special-rate annuities are not the same in all markets. [...] We note that according to (3.4), the mortality rate of a risk class is affected by two sources of uncertainty: the mortality dynamics of the reference population and the het- erogeneity in the risk class. [...] In order to analyse the risk profile of the pool, we assess the ε quantiles of the present value at time 0 of the future benefits for the whole pool, PVFP0, that we denote as PVFPε0. [...] As to the coefficients zi’s in a deterministic setting and the parameters of the Gamma distribution for coefficients Zi’s in a stochastic setting, we make the assumptions summarized in Table 1, in terms of the fixed value of deterministic coeffi- cients zi’s, and the expected value and coefficient of variation of the stochastic coefficients Zi’s.
- Pages
- 22
- Published in
- Australia
