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Minimizing the Probability of Lifetime Ruin with Deferred Life Annuities

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  • Erhan Bayraktar
  • Virginia Young

Abstract

We find the minimum probability of lifetime ruin of an investor who can invest in a market with a risky and a riskless asset and who can purchase a deferred life annuity. Although we let the admissible set of strategies of annuity purchasing process be the set of increasing adapted processes, we find that the individual will not buy a deferred life annuity unless she can cover all her consumption via the annuity and have enough wealth left over to sustain her until the end of the deferral period.

Suggested Citation

  • Erhan Bayraktar & Virginia Young, 2009. "Minimizing the Probability of Lifetime Ruin with Deferred Life Annuities," North American Actuarial Journal, Taylor & Francis Journals, vol. 13(1), pages 141-154.
    • Handle: RePEc:taf:uaajxx:v:13:y:2009:i:1:p:141-154
    DOI: 10.1080/10920277.2009.10597543
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    Cited by:

    1. Liang, Xiaoqing & Young, Virginia R., 2023. "Annuitizing at a bounded, absolutely continuous rate to minimize the probability of lifetime ruin," Insurance: Mathematics and Economics, Elsevier, vol. 112(C), pages 80-96.
    2. Wang, Ting & Young, Virginia R., 2012. "Optimal commutable annuities to minimize the probability of lifetime ruin," Insurance: Mathematics and Economics, Elsevier, vol. 50(1), pages 200-216.

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