Evolution of coupled lives' dependency across generations and pricing impact

This paper studies the dependence between coupled lives - both within and across generations - and its effects on prices of reversionary annuities in the presence of longevity risk. Longevity risk is represented via a stochastic mortality intensity. Dependence is modelled through copula functions. We consider Archimedean single and multi-parameter copulas. We and that dependence decreases when passing from older generations to younger generations. Not only the level of dependence but also its features - as measured by the copula - change across generations: the best-fit Archimedean copula is not the same across generations. Moreover, for all the generations under exam the single-parameter copula is dominated by the two-parameter one. The independence assumption produces quantifiable mispricing of reversionary annuities. The misspecification of the copula produces different mispricing effects on different generations. The research is conducted using a well-known dataset of double life contracts

The management of de-cumulation risks in a defined contribution environment

The aim of the paper is to lay the theoretical foundations for the construction of a flexible tool that can be used by pensioners to find optimal investment and consumption choices in the distribution phase of a defined contribution pension scheme. The investment/consumption plan is adopted until the time of compulsory annuitization, taking into account the possibility of earlier death. The effect of the bequest motive and the desire to buy a higher annuity than the one purchasable at retirement are included in the objective function. The mathematical tools provided by dynamic programming techniques are applied to find closed form solutions: numer-ical examples are also presented. In the model, the trade-off between the different desires of the individual regarding consumption and final annuity can be dealt with by choosing appropriate weights for these factors in the setting of the problem. Conclusions are twofold. Firstly, we find that there is a natural time-varying target for the size of the fund, which acts as a sort of safety level for the needs of the pensioner. Secondly, the personal preferences of the pensioner can be translated into optimal choices, which in turn affect the distribution of the consumption path and of the final annuity

Application of the socio-ecological system framework to forest fire risk management: A systematic literature review

Although increasing concern about climate change has raised awareness of the fundamental role of forest ecosystems, forests are threatened by human-induced impacts worldwide. Among them, wildfire risk is clearly the result of the interaction between human activities, ecological domains, and climate. However, a clear understanding of these interactions is still needed both at the global and local levels. Numerous studies have proven the validity of the socioecological system (SES) approach in addressing this kind of interdisciplinary issue. Therefore, a systematic review of the existing literature on the application of SES frameworks to forest ecosystems is carried out, with a specific focus on wildfire risk management. The results demonstrate the existence of different methodological approaches that can be grouped into seven main categories, which range from qualitative analysis to quantitative spatially explicit investigations. The strengths and limitations of the approaches are discussed, with a specific reference to the geographical setting of the works. The research suggests the importance of local community involvement and local knowledge consideration in wildfire risk management. This review provides a starting point for future research on forest SES and a supporting tool for the development of a sustainable wildfire risk adaptation and mitigation strategy

Formation of the first three gravitational-wave observations through isolated binary evolution

During its first 4 months of taking data, Advanced LIGO has detected gravitational waves from two binary black hole mergers, GW150914 and GW151226, along with the statistically less significant binary black hole merger candidate LVT151012. We use our rapid binary population synthesis code COMPAS to show that all three events can be explained by a single evolutionary channel -- classical isolated binary evolution via mass transfer including a common envelope phase. We show all three events could have formed in low-metallicity environments (Z = 0.001) from progenitor binaries with typical total masses $\gtrsim 160 M_\odot$, $\gtrsim 60 M_\odot$ and $\gtrsim 90 M_\odot$, for GW150914, GW151226, and LVT151012, respectively.Comment: Published in Nature Communication