Optimal Annuitization with Markov Regime Switching Model
0
조회
0
다운로드
2
인용
0
참고문헌
키워드
초록
We develop a new dynamic model of annuitization in which a Cobb- Douglas- type consumption-leisure utility maximizing individual receives non-traded constant labor income and has to decide on her allocation between a stock and a risk-free asset, as well as decide on the time when she enters full annuitization at one distinct point in time (around optimal retirement age). The distinct feature of the paper results from its consideration for a two-state regime-switching market environment. We analytically derive regime-dependent thresholds of wealth for annuitization and quantitatively identify the target annuitization wealth levels under the carefully chosen baseline parameter values. In particular, we find that the target annuitization wealth level is smaller in the Bull market than in the bear market, thus accounting for the reality that U.S. individuals opted for early annuitization in the Bull market as observed in the late 1990’s.
Abstract
We develop a new dynamic model of annuitization in which a Cobb- Douglas- type consumption-leisure utility maximizing individual receives non-traded constant labor income and has to decide on her allocation between a stock and a risk-free asset, as well as decide on the time when she enters full annuitization at one distinct point in time (around optimal retirement age). The distinct feature of the paper results from its consideration for a two-state regime-switching market environment. We analytically derive regime-dependent thresholds of wealth for annuitization and quantitatively identify the target annuitization wealth levels under the carefully chosen baseline parameter values. In particular, we find that the target annuitization wealth level is smaller in the Bull market than in the bear market, thus accounting for the reality that U.S. individuals opted for early annuitization in the Bull market as observed in the late 1990’s.
참고문헌 (27)
- Ang, A., "International Asset Allocation with Regime Shifts", Review of Financial Studies, 15, pp.1137~1187 (2002)[DOI]
- Bensoussan, A., "Applications of Variational Inequalities in Stochastic Control" (1982), North Holland
- Bensoussan, A., "Threshold-Type Policies for Real Options Using Regime-Switching Models", SIAM Journal on Financial Mathematics, 3, pp.667~689 (2012)[DOI]
- Cai, J., "Portfolio Selection with Capital Gain Tax, Recursive Utility, and Regime Switching", Management Science, 64, pp.2308~2324 (2018)[DOI]
- Dai, M., "Portfolio Choice with Market Closure and Implications for Liquidity Premia", Management Science, 62, pp.368~386 (2016)[DOI]
- Davidoff, T., "Annuities and Individual Welfare", American Economic Review, 95, pp.1573~1590 (2005)[DOI]
- Duffie, D., "Stochastic Differential Utility", Econometrica, 60, pp.353~394 (1992)[DOI]
- Farhi, E., "Saving and Investing for Early Retirement : A Theoretical Analysis", Journal of Financial Economics, 83, pp.87~121 (2007)[DOI]
- Gomes, F. J., "Optimal Life-Cycle Investing with Flexible Labor Supply : A Welfare Analysis of Life-Cycle Funds", American Economic Review, 98, pp.297~303 (2008)[DOI]
- Retirement and The Stock Market Bubble, "Gustman, A. L.", ~ (2002)
- Guo, X., "Irreversible Investment with Regime Shifts", Journal of Economic Theory, 122, pp.37~59 (2005)
- Gustman, A. L., "What the Stock Market Decline Means for the Financial Security and Retirement Choices of the Near-Retirement Population", Journal of Economic Perspectives, 24, pp.161~182 (2010)[DOI]
- Hamilton, J. D, "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle", Econometrica : Journal of the Econometric Society, 57, pp.357~384 (1989)[DOI]
- Jang, B. G., "Liquidity Premia and Transaction Costs", Journal of Finance, 62, pp.2329~2366 (2007)[DOI]
- Jang, B. G., "Optimal Retirement with Unemployment Risks", Journal of Banking and Finance, 37, pp.3585~3604 (2013)[DOI]
- 전준기, "Optimal Annuitization with Early Retirement: A Martingale-Dual Approach", 리스크관리연구, 33(2), pp.71~113 (2022), 한국리스크관리학회[DOI]
- Kim, J. G., "Annuitization and Asset Allocation with Borrowing Constraints", Operations Research Letters, pp.48549~48551 (2020)
- Kim, M. H., "Industry Portfolio Allocation with Asymmetric Correlations", European Journal of Finance, 27, pp.178~198 (2021)[DOI]
- 이효찬, "Optimal investment with timevarying transition probabilities for regime switching", 선물연구, 29(2), pp.102~115 (2021), 한국파생상품학회[DOI]
- Liu, H., "Market Crashes, Correlated Illiquidity, and Portfolio Choice", Management Science, 59, pp.715~732 (2013)[DOI]
- Milevsky, M. A., "Annuitization and Asset Allocation", Journal of Economic Dynamics and Control, 31, pp.3138~3177 (2007)
- ksendal, B, "Stochastic Differential Equations: An Introduction with Applications" (2007), Springer
- Park, S, "A Generalization of Yaari’s Result on Annuitization with Optimal Retirement", Economics Letters, 137, pp.17~20 (2015)
- Park, S, "Verification Theorems for Models of Optimal Consumption and Investment with Annuitization", Mathematical Social Sciences, 103, pp.36~44 (2020)[DOI]
- 박세영, "Liquidity constraints and optimal annuitization", 선물연구, 30(2), pp.125~142 (2022), 한국파생상품학회[DOI]
- Richard, S, "Optimal Consumption, Portfolio and Life Insurance Rules for an Uncertain Lived Individual in a Continuous Time Model", Journal of Financial Economics, 2, pp.187~203 (1975)[DOI]
- Yaari, M. E, "Uncertain Lifetime, Life Insurance and the Theory of the Consumer", Review of Economics Studies, 32, pp.137~150 (1965)[DOI]