Analytic approach for models of optimal retirement with disability risk
Models of optimal retirement should reflect market incompleteness in reality caused by disability risk. In this paper, we develop an analytic approach for optimal retirement models with disability risk. More precisely, we provide an analytically tractable characterization of total wealth that is the...
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Published in | Mathematical social sciences Vol. 126; pp. 68 - 75 |
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Main Authors | , , |
Format | Journal Article |
Language | English |
Published |
Elsevier B.V
01.11.2023
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Subjects | |
Online Access | Get full text |
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Summary: | Models of optimal retirement should reflect market incompleteness in reality caused by disability risk. In this paper, we develop an analytic approach for optimal retirement models with disability risk. More precisely, we provide an analytically tractable characterization of total wealth that is the sum of financial wealth and the present value of future income. We then provide analytic properties of the retirement wealth threshold. Finally, we derive the analytical optimal consumption and portfolio choice with retirement and disability risk.
•We develop an analytic incomplete-market approach for optimal retirement models with disability risk.•Analytically tractable optimal strategies are provided.•Various mathematical and economic properties of optimal strategies are obtained. |
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ISSN: | 0165-4896 1879-3118 |
DOI: | 10.1016/j.mathsocsci.2023.09.007 |