brewer12345
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
- Joined
- Mar 6, 2003
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I am about halfway through an article in the Financial Analysts' Journal co-authored by Moshe Milevsky that discuses optimal and real world asset allocation in VA contracts when you buy a guaranteed minimum income benefit. Might be worth looking up if you care about this stuff, as it is interesting so far. Abstract:
Portfolio Choice with Puts: Evidence from Variable Annuities
Financial Analysts Journal
Moshe A. Milevsky and Vladyslav Kyrychenko
May/June 2008, Vol. 64, No. 3: 80-95
(doi: 10.2469/faj.v64.n3.8)
View Table of Contents
Abstract
This study investigated the asset allocation behavior of individuals who select an out-of-the-money long-dated longevity-put option on their investment funds. The asset allocations of these people within their variable annuity subaccounts are 5–30 percent more risky than the allocations of those who do not choose this protection. Investors who do not choose the longevity-put option follow the classic life-cycle, age-phased reduction in equity. A rudimentary model of utility-maximizing behavior is suggested that justifies the increased allocation to risk as long as the investor understands the payoff structure of the longevity put and is willing and able to exercise the annuity option if and when it matures in the money.
Portfolio Choice with Puts: Evidence from Variable Annuities
Financial Analysts Journal
Moshe A. Milevsky and Vladyslav Kyrychenko
May/June 2008, Vol. 64, No. 3: 80-95
(doi: 10.2469/faj.v64.n3.8)
View Table of Contents
Abstract
This study investigated the asset allocation behavior of individuals who select an out-of-the-money long-dated longevity-put option on their investment funds. The asset allocations of these people within their variable annuity subaccounts are 5–30 percent more risky than the allocations of those who do not choose this protection. Investors who do not choose the longevity-put option follow the classic life-cycle, age-phased reduction in equity. A rudimentary model of utility-maximizing behavior is suggested that justifies the increased allocation to risk as long as the investor understands the payoff structure of the longevity put and is willing and able to exercise the annuity option if and when it matures in the money.