Reverse mortages (RM) provide an attractive way to increase retirement incomes and to face the needs of health care for elderly people. The RM market is exposed to a number of risks: (1) longevity risk, as retirees’ life expectancy increases, (2) interest rate risk, especially in the low-rate post- crisis period, (3) property market risk, in the last stage of the current business cycle. We measure the overall risk for an insurer with a book of RM contracts. We also evaluate the optimal demand for RM in a retiree’s investment portfolio, taking into account diversification with respect to other asset classes.Numerical results are shown and suggestions to further developments of the market are offered.
Reverse Mortgages: Risks and Opportunities / DI LORENZO, Emilia; Piscopo, Gabriella; Sibillo, Marilena; Tizzano, Roberto. - (2019). (Intervento presentato al convegno 19th Applied Stochastic Models and Data Analysis International Conference (ASMDA2019) with Demographics 2019 Workshop tenutosi a Florence, Italy nel 11-14 June, 2019).
Reverse Mortgages: Risks and Opportunities
Emilia Di Lorenzo;Gabriella Piscopo;Roberto Tizzano
2019
Abstract
Reverse mortages (RM) provide an attractive way to increase retirement incomes and to face the needs of health care for elderly people. The RM market is exposed to a number of risks: (1) longevity risk, as retirees’ life expectancy increases, (2) interest rate risk, especially in the low-rate post- crisis period, (3) property market risk, in the last stage of the current business cycle. We measure the overall risk for an insurer with a book of RM contracts. We also evaluate the optimal demand for RM in a retiree’s investment portfolio, taking into account diversification with respect to other asset classes.Numerical results are shown and suggestions to further developments of the market are offered.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
