Household Consumption, Investment and Life Insurance

Bruhn, Kenneth; Steffensen, Mogens

doi:10.2139/ssrn.1586229

Cited by 11 publications

(19 citation statements)

References 12 publications

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“…As in e.g. Richard (1975), Bruhn & Steffensen (2011) among others, we assume that N has intensity m under P and m n under P n , and refer to them as the objective mortality intensity and the pricing intensity.…”

Section: Classical Resultsmentioning

confidence: 99%

“…The model is based on Richard (1975), who considers the same problem without taxation 1 . For the numerical investigation performed here, we parameterize our model in terms of a household model in the notion of Bruhn & Steffensen (2011). They develop a model for optimal consumption, investment and life insurance purchase for a general household consisting of multiple members.…”

Section: Introductionmentioning

confidence: 99%

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Consumption, investment and life insurance under different tax regimes

Bruhn

2012

Ann. actuar. sci.

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We study the effects of introducing taxation in classical continuous-time optimization problems with utility from consumption, bequest and retirement savings. Inspired by actual tax favoured retirement savings programs, we formulate and solve the optimization problem for various tax regimes, and compare tax effects on consumption/savings contributions, investment and purchase of life insurance under the regimes. The optimization problems have analytical solutions, which allow for easy comparison of tax effects under the different regimes. To substantiate the results we also present a numerical analysis of the results based on realistic parameter values and regimes. Based on American and Danish tax regimes we estimate the values of existing retirement saving favouring to be 1 – 2 percent of lifetime income.

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Section: Classical Resultsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Consumption, investment and life insurance under different tax regimes

Bruhn

2012

Ann. actuar. sci.

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“…Under this assumption, the authors constructed a weighted average utility of a family and solved the optimal strategy problem to maximize the utility. Bruhn and Steffensen () developed a continuous‐time utility optimization Markov model for households, which could control consumption, investments, and purchase of life insurance for each person in the household. And the optimal controls were investigated in special cases of one‐person and two‐person households.…”

Section: Introductionmentioning

confidence: 99%

“…Various aspects of the consumption–investment–insurance issues have been studied in existing literatures, but some problems have yet to be solved. While many scholars take a family as a unit to study the consumption–investment–insurance issues (Bruhn and Steffensen, ; Kwak, Shin, and Choi, ), they ignore the intergenerational transfer payment issues: the fees spent on the elders and children are actually one part of the family expenditure; when an individual becomes old, the financial support from his children is also a part of his income. Our article aims to solve the consumption–investment–insurance issue under the consideration of intergenerational transfer payments.…”

Section: Introductionmentioning

confidence: 99%

“…Our article aims to solve the consumption–investment–insurance issue under the consideration of intergenerational transfer payments. To our understanding, neither the continuous models (Yaari, ; Richard, ; Bruhn and Steffensen, ) nor the discrete models (Hakansson, ; Babbel and Ohtsuka, ; Zhu, ) can give a description of intergenerational transfer payments. We adopt the overlapping generations (OLG) model, which introduces both the entering of new generations and the leaving of old generations and is actually a lifecycle consuming and saving framework, to complete our study.…”

Section: Introductionmentioning

confidence: 99%

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An OLG Model for Optimal Investment and Insurance Decisions

Li¹,

Liao²,

Xu³

2013

J of Risk & Insurance

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This article uses overlapping generation (OLG) model to study individuals' optimal decision on consumption, investment, insurance, and education expenses. To the best of our knowledge, we are the first to discuss the individuals' demand for insurance with the consideration of intergenerational transfer payments. In the article, we incorporate insurance into the OLG model to describe individuals' optimization problem on consuming and saving, and we solve the optimal proportions of expenditure on investment, survival insurance, life insurance, and education, with the optimal consumption to be the remaining parts of expenditure. We observe that the numerical outputs are consistent with the actual data. It is also interesting to find that the human capital investment is independent of both risky asset investment and individuals' risk aversion coefficient.

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Personal Finance Decisions with Untruthful Advisors: An Agent-Based Model

2022

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Investors usually resort to financial advisors to improve their investment process until the point of complete delegation on investment decisions. Surely, financial advice is potentially a correcting factor in investment decisions but, in the past, the media and regulators blamed biased advisors for manipulating the expectations of naive investors. In order to give an analytic formulation of the problem, we present an Agent-Based Model formed by individual investors and a financial advisor. We parametrize the games by considering a compromise for the financial advisor (between a sufficient reward by bank and to keep her reputation), and a compromise for the customers (between the desired return and the proposed return by advisor), and incorporating the social psychological concepts of truthfulness and cognitive dissonance. Then we obtain the Nash equilibria and the best response functions of the resulting game. We also describe the parameter regions in which these points result acceptable equilibria. In this way, the greediness/naivety of the customers emerge naturally from the model. Finally, we focus on the efficiency of the best Nash equilibrium.

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Household Consumption, Investment and Life Insurance

Cited by 11 publications

References 12 publications

Consumption, investment and life insurance under different tax regimes

Consumption, investment and life insurance under different tax regimes

An OLG Model for Optimal Investment and Insurance Decisions

Personal Finance Decisions with Untruthful Advisors: An Agent-Based Model

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