WORKSHOP ON RISK ANALYSIS AND APPLICATIONS
24 and 25 of SEPTEMBER, 2025
Institute of Mathematics and, Statistics of the University of São Paulo, Brazil
SATELLITE WORKSHOP OF
8th BRAZILIAN CONFERENCE ON STATISTICAL MODELING IN INSURANCE AND FINANCE
WORKSHOP ON RISK ANALYSIS AND APPLICATIONS
24 and 25 of SEPTEMBER, 2025
Institute of Mathematics and, Statistics of the University of São Paulo, Brazil
SATELLITE WORKSHOP OF
8th BRAZILIAN CONFERENCE ON STATISTICAL MODELING IN INSURANCE AND FINANCE
Title: Optimal Life-contingent Payoffs: A Peer to Peer Solution
In this talk, we consider an investor with a general state-dependent utility in that she assigns different utility functions to the states of survival and death. As our first contribution, we explicitly derive her optimal life-contingent payoff, influenced by mortality and financial risk, assuming that actuarially fair premiums for mortality risk are charged.
However, we also show that if a risk loading for the mortality risk applies, the optimal life-contingent payoff can no longer be purchased. Instead, we propose, which is our second contribution, a peer-to-peer solution to approximate the optimal life-contingent payoff via a pool that delivers a proxy payout to each pool member. We show that if the pool is sufficiently large, the proxy payout converges almost surely against the optimal life-contingent payoff (joint work with An Chen and Morten Wilke).