Unit-Linked Tontine: Utility-Based Design, Pricing and Performance

Unit-Linked Tontine: Utility-Based Design, Pricing and Performance

Blog Article

Due to the low demand for conventional annuities, alternative retirement products are sought.Quite recently, animationbengal.com tontines have been frequently brought up as a promising option in this respect.Inspired by unit-linked life insurance and retirement products, we introduce unit-linked tontines in this article, where the tontine payoffs are directly linked to the development of the underlying financial market.More specifically, we consider two different tontine payoff structures differing in the (non-)inclusion of guaranteed payments.We first price the unit-linked tontines by using the risk-neutral pricing approach.

Consequently, we study the attractiveness of these products for a utility-maximizing policyholder and compare them abc material with non-unit-linked tontines.Our numerical analysis sheds light on the design challenges and gives explanations why similar products might not be widely adopted already.