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Thursday, July 11, 2019 — 4:00 PM EDT

On making valid inferences by combining data from multiple sources: An appraisal

National statistical agencies have long been using probability samples from multiple sources in conjunction with census and administrative data to make valid and efficient inferences on population parameters of interest, leading to reliable official statistics. This topic has received a lot of attention more recently in the context of decreasing response rates from probability samples and availability of data from non-probability samples and in particular “big data”. In this talk, I will discuss some methods, based on models for the non-probability samples, which could lead to useful inferences when combined with probability samples observing only auxiliary variables related to a variable of interest.  I will also explain how big data may be used as predictors in small area estimation and comment on using non-probability samples to produce “real time” official statistics.

Monday, July 22, 2019 — 4:00 PM EDT

Negative Marginal Option Values: The Interaction of Frictions and Option Exercise in Variable Annuities

Market frictions can affect option exercise, which in turn affects the value of a marginal option to the writer—and may even yield negative marginal option values. We demonstrate the relevance of this mechanism in the context of variable annuities with popular withdrawal guarantees, both theoretically and empirically. More precisely, we show that in the presence of income and capital gains taxation for the policyholder, adding on a common death benefit option—allowing to continue the withdrawal guarantee in case of death—changes the policy- holder’s optimal withdrawal behavior. As a consequence, the total value of the contract from the perspective of the insurer may decrease, i.e. the marginal option value is negative. This explains the common practice of including death benefit options without additional charges in these products.

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