Quantitative Finance and Insurance

Understading Economic and psychological determinants of savings; functioning of both public and private pension systems; incentive and redistributive effects of pension systems.

Ability to solve intertemporal optimisation problems, also under uncertainty. Knowledge of pension economics

Covered topics are: i. Microeconomic foundations of retirement savings  • Basic deterministic models  (intertemporal optimization models: assumptions and main results) • Life uncertainty and its effects   • The introduction of (actuarially fair) life insurance and the dominance of annuities  • Why is the market for annuities everywhere so thin?  ii. An economic analysis of social security (micro and macroeconomic features of social security) • Financing mode: PAYG vs. Funding  • Pension formulae (DB vs. DC) • Actuarial fairness and neutrality • Measures of financial sustainability  • Measures of adequacy • Redistribution (both within and between generations) • Incentive structure  • (Induced) retirement   • The aggregate pension wealth (debt) iii. Theoretical and empirical models of retirement • Stylised facts about retirement  • Determinants of retirement choice • The implicit tax on postponing retirement (and related measures)   iv. Positive models of social security and the economics of pension reforms • A political economic approach to social security  • Assessing the political sustainability of social security reforms

Testi consigliati e bibliografia

1. Browning, M., A. Lusardi, 1996, “Household Saving: Micro Theories and Micro Facts”, Journal of Economic Literature, 34, 1797-1855. 2. Barr N, P. Diamond, Reforming Pensions, http://ssrn.com/abstract=1315444 3. Coronado J. L., D. Fullerton, T. Glass, 1999, “Distributional Impacts of Proposed Changes to the Social Security System in Tax Policy and the Economy, Vol. 13, Poterba, Jim, ed., 1999, pp. 149-186. 4. Diamond P. and P. Orszag, 2004, Saving Social Security. A Balanced Approach, Brookings Institution Press, Washington DC. 5. Diamond Peter, 2005, “Social Security Rules that Vary with Age”, in: Fornero, E. and P. Sestito (eds), 2005, Pension Systems: Beyond Mandatory Retirement, Cheltenham: Edward Elgar . 6. Diamond, P. 2004, ‘Social Security’, The American Economic Review, 94(1), March 2004 7. Disney, R., “Actuarial-based public pension systems”, in: G. Clark, A. Munnell and M. Orszag, The Oxford Handbook of Pensions and Retirement Income, OUP, 2006. 8. Fenge R. and Pestieau P., 2005, “Social Security and Early Retirement”, Cesifo Book Series, the MIT Press. 9. French E, 2005, The Effects of Health, Wealth and Wages on the Labour Supply and Retirement, Review of Economic Studies, vol 72, no 2, Aprile, 395-427. 10. Fornero E, A Lusardi, C Monticone, Adequacy of Saving for Old Age in Europe, prepared for the ESF Forward Look project Ageing, Health and Pensions in Europe (the Hague, April 22nd, 2009)

11. Geanakoplos J., O.S. Mitchell, S. P. Zeldes, 1998, “Social Security Money’s Worth”, PaineWebber WP Series in Money, Economics and Finance 98-05, Columbia Business School, August.

12. Gourinchas P.O., Parker J., 2002, “Consumption over the life cycle” Econometrica, vol. 70, no 1 (January, 47-89

13. Gruber J., D. Wise (eds.), 1999, Social Security and Retirement Around the World, Chicago: University of Chicago Press. 14. Lindbeck A. and M. Persson, 2003, “The Gains from Pension Reform”, Journal of Economic Literature, vol. 41 (1), pp. 74-112. 15. Mitchell O. S., S. P. Zeldes, 1996, “Social Security Privatization: a Structure for Analysis”, American Economic Review, 86(2), pp: 363-67. . 16. Scholtz K. Seshadri A., Khitatrakun S., 2006, “Are Americans Saving “Optimally” for Retirement?” Journal of Political Economy, 114(4), pp. 607-643.