Based On A Stochastic Model Of The Annuity Cost And Risk Analysis

Mortality and interest rate are primary factors which influence the costs and risks of life annuities. It is increasingly important to study random interest in the modern financial market. As mortality is decreasing annually, the social security system is facing a great challenge under the environment of the aged population.The following are the primary conclusions of this article:1. When interest rate and mortality are both random, life annuities have greater risks;2. When neither interest rate nor mortality is random, the risks are minimized. when one of them is random, the risk is increased by some amount. when both are random, the increment in the risk is greater than the sum of the previous two increments.