The annuity puzzle and consumption hump under ambiguous life expectancy (Q2234752)

The paper presents a continuous-time model to solve the optimal consumption-saving problem with life annuity. After depicting the basic assumptions concerning the decision maker's optimization problem and the ambiguity into the model, the optimization problem is solved by the approach of stochastic dynamic programming; the optimal consumption and annuity policies are obtained, assuming that individual preferences are governed by specific assumptions. Moreover, numerical examples provide application evidences of the results presented in the paper. Some proofs and technical details are included in the Appendices.