A gap between rational annuitization price for producer and price for customer
The paper studies pricing of insurance products focusing on the pricing of annuities under uncertainty. This pricing problem is crucial for financial decision making and was studied intensively; however, many open questions still remain. In particular, there is a so-called ``annuity puzz...
| Main Author: | |
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| Format: | Journal Article |
| Published: |
Palgrave Macmillan UK
2018
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| Online Access: | https://www.palgrave.com/gp/journal/41272 http://hdl.handle.net/20.500.11937/73047 |
| _version_ | 1848762909790830592 |
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| author | Dokuchaev, Nikolai |
| author_facet | Dokuchaev, Nikolai |
| author_sort | Dokuchaev, Nikolai |
| building | Curtin Institutional Repository |
| collection | Online Access |
| description | The paper studies pricing of insurance products focusing on the pricing of annuities under uncertainty. This pricing problem is crucial for financial decision making and was studied intensively; however, many open questions still remain. In particular, there is a so-called ``annuity puzzle" related to certain inconsistency of existing financial theory with the empirical observations for the annuities market. The paper suggests a pricing method based on the risk minimization such that both producer and customer seek to minimize the mean square hedging error accepted as a measure of risk. This leads to two different versions of the pricing problem: the selection of the annuity price given the rate of regular payments, and the selection of the rate of payments given the annuity price. It appears that solutions of these two problems are different. This can contribute to explanation for the "annuity puzzle". |
| first_indexed | 2025-11-14T10:55:04Z |
| format | Journal Article |
| id | curtin-20.500.11937-73047 |
| institution | Curtin University Malaysia |
| institution_category | Local University |
| last_indexed | 2025-11-14T10:55:04Z |
| publishDate | 2018 |
| publisher | Palgrave Macmillan UK |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | curtin-20.500.11937-730472021-10-19T01:24:52Z A gap between rational annuitization price for producer and price for customer Dokuchaev, Nikolai The paper studies pricing of insurance products focusing on the pricing of annuities under uncertainty. This pricing problem is crucial for financial decision making and was studied intensively; however, many open questions still remain. In particular, there is a so-called ``annuity puzzle" related to certain inconsistency of existing financial theory with the empirical observations for the annuities market. The paper suggests a pricing method based on the risk minimization such that both producer and customer seek to minimize the mean square hedging error accepted as a measure of risk. This leads to two different versions of the pricing problem: the selection of the annuity price given the rate of regular payments, and the selection of the rate of payments given the annuity price. It appears that solutions of these two problems are different. This can contribute to explanation for the "annuity puzzle". 2018 Journal Article http://hdl.handle.net/20.500.11937/73047 10.1057/s41272-018-00163-5 https://www.palgrave.com/gp/journal/41272 Palgrave Macmillan UK fulltext |
| spellingShingle | Dokuchaev, Nikolai A gap between rational annuitization price for producer and price for customer |
| title | A gap between rational annuitization price for producer and price for customer |
| title_full | A gap between rational annuitization price for producer and price for customer |
| title_fullStr | A gap between rational annuitization price for producer and price for customer |
| title_full_unstemmed | A gap between rational annuitization price for producer and price for customer |
| title_short | A gap between rational annuitization price for producer and price for customer |
| title_sort | gap between rational annuitization price for producer and price for customer |
| url | https://www.palgrave.com/gp/journal/41272 http://hdl.handle.net/20.500.11937/73047 |