Department seminar by Pengyu Wei, UNSW Business SchoolExport this event to calendar

Thursday, January 31, 2019 — 4:00 PM EST

How does consumption habit affect the household’s demand for life-contingent claims?


This paper examines the impact of habit formation on demand for life-contingent claims. We propose a life-cycle model with habit formation and solve the optimal consumption, portfolio choice, and life insurance/annuity problem analytically. We illustrate how consumption habits can alter the bequest motive and therefore drive the demand for life-contingent products. Finally, we use our model to examine the mismatch in the life insurance market between the life insurance holdings of most households and their underlying financial vulnerabilities, and the mismatch in the annuity market between the lack of any annuitization and the risk of outliving financial wealth.

Location 
M3 - Mathematics 3
Room: 3127
200 University Avenue West

Waterloo, ON N2L 3G1
Canada

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