Intergenerational Risk Sharing with Market Liquidity Risk

Arbeitspapier

This paper examines the optimal allocation of risk across generations whose savings mix is subject to illiquidity in the form of uncertain trading costs. We use a stylised two-period OLG framework, where each generation makes a portfolio allocation decision for retirement, and show that illiquidity reduces the range of transferable shocks between generations and thus lowers the benefits of risk-sharing. Higher illiquidity then may justify higher levels of risk sharing to compensate for the trading friction. We still find that a contingent transfers policy based on a reasonably parametrised savings portfolio with liquid and illiquid assets increased aggregate welfare.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Tinbergen Institute Discussion Paper ; No. TI 2022-028/VI

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Portfolio Choice; Investment Decisions ; Pension Funds; Non-bank Financial Institutions; Financial Instruments; Institutional Investors ; Macroeconomics: Consumption; Saving; Wealth ; Social Security and Public Pensions
• Thema: intergenerational risk sharing ; (il)liquidity ; stochastic overlapping generations ; funded pension plan

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Dimitrov, Daniel
• Ereignis: Veröffentlichung
• (wer): Tinbergen Institute
• (wo): Amsterdam and Rotterdam
• (wann): 2022

Weitere Informationen

• Handle: http://hdl.handle.net/10419/263948
• Letzte Aktualisierung: 10.03.2025, 11:43 MEZ