{"id":2106,"date":"2014-03-23T17:43:40","date_gmt":"2014-03-23T17:43:40","guid":{"rendered":"http:\/\/wiki.davelevy.info\/?p=2106"},"modified":"2023-06-27T16:01:54","modified_gmt":"2023-06-27T16:01:54","slug":"annuities-a-note-on-price-theory","status":"publish","type":"post","link":"https:\/\/davelevy.info\/wiki\/annuities-a-note-on-price-theory\/","title":{"rendered":"Annuities, a note on price theory"},"content":{"rendered":"\n<p>While researching my articles on <a title=\"Bingo, savings and annuities at my blog\" href=\"http:\/\/blog.davelevy.info\/2014\/03\/20\/bingo-savings-and-annuities\/\">the UK 2014 budget<\/a>, I wanted to write a quick note on Annuity prices, yields and interest rates, I came across nothing easy to find or understand. There is a companion wiki article on the <a title=\"on this wiki\" href=\"https:\/\/davelevy.info\/wiki\/uk-budget-2014\/\">UK 2014 Budget<\/a>. This was created in 2014 and amended in 2023, when the notes on swap pricing was added. Later in the year, I restored the link to Sheshinski&#8217;s book. &#8230;<\/p>\n\n\n\n<!--more-->\n\n\n\n<p>This citation got lost in the 2023 tidy up, Sheshinski, Eytan. <em>The Economic Theory of Annuities<\/em>, Princeton: Princeton University Press, 2008. <a href=\"https:\/\/doi.org\/10.1515\/9781400829422\">https:\/\/doi.org\/10.1515\/9781400829422<\/a><\/p>\n\n\n\n<p>For dummies<\/p>\n\n\n\n<p>A loan involves a bank giving someone a wedge of cash in exchange for an agreed periodic payment. An annuity involves a bank giving someone an agreed periodic payment in exchange for a wedge of cash. They are the same thing! So we should be able to price them the same way.<\/p>\n\n\n\n<p>These are in fact swaps, and so,<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li><a href=\"https:\/\/www.cfainstitute.org\/en\/membership\/professional-development\/refresher-readings\/pricing-valuation-interest-rate-swaps\">Pricing and valuation of interest-rates and other swaps<\/a>, from the CFA Institute; interest rate swaps maybe not what we need, although they should be.<\/li>\n\n\n\n<li>How to calculate <a href=\"https:\/\/www.annuity.org\/selling-payments\/present-value\/\">present value<\/a> of an annuity by annuity.org. Is this it? <\/li>\n\n\n\n<li>And <a href=\"https:\/\/www.forbes.com\/sites\/wadepfau\/2020\/05\/15\/annuity-pricing-101\/\">Annuity pricing 101<\/a> has prices and formulae, at Forbes.<\/li>\n<\/ol>\n","protected":false},"excerpt":{"rendered":"<p>While researching my articles on the UK 2014 budget, I wanted to write a quick note on Annuity prices, yields and interest rates, I came across nothing easy to find or understand. There is a companion wiki article on the UK 2014 Budget. This was created in 2014 and amended in 2023, when the notes&#8230;<\/p>\n","protected":false},"author":1,"featured_media":7792,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":"","_share_on_mastodon":"0"},"categories":[137],"tags":[644,646,645,643,138,648,647],"class_list":["post-2106","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economics","tag-644","tag-annuities","tag-annuity","tag-budget","tag-economics-2","tag-eytan-sheshinski","tag-price-theory"],"share_on_mastodon":{"url":"","error":""},"jetpack_featured_media_url":"https:\/\/davelevy.info\/wiki\/wp-content\/uploads\/2014\/03\/equation-saadahmad-unsplash-w1800.jpg","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/davelevy.info\/wiki\/wp-json\/wp\/v2\/posts\/2106","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/davelevy.info\/wiki\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/davelevy.info\/wiki\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/davelevy.info\/wiki\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/davelevy.info\/wiki\/wp-json\/wp\/v2\/comments?post=2106"}],"version-history":[{"count":10,"href":"https:\/\/davelevy.info\/wiki\/wp-json\/wp\/v2\/posts\/2106\/revisions"}],"predecessor-version":[{"id":8417,"href":"https:\/\/davelevy.info\/wiki\/wp-json\/wp\/v2\/posts\/2106\/revisions\/8417"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/davelevy.info\/wiki\/wp-json\/wp\/v2\/media\/7792"}],"wp:attachment":[{"href":"https:\/\/davelevy.info\/wiki\/wp-json\/wp\/v2\/media?parent=2106"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/davelevy.info\/wiki\/wp-json\/wp\/v2\/categories?post=2106"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/davelevy.info\/wiki\/wp-json\/wp\/v2\/tags?post=2106"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}