Click to login and read the full article.
Don’t have access? Click here to request a demo
Alternatively, Call a member of the team to discuss membership options
US and Overseas: +1 646-931-9045
UK: 0207 139 1600
Abstract
Prendergast (2021) develops a methodology that enables retail investors to structure annuities using commonly available U.S. Treasury Exchange Traded Funds (ETFs). This article extends that methodology through the use of key rate durations. Back tests and stress tests show that the use of key rate durations substantially enhances the ability of the portfolio of ETFs to replicate an annuity in an environment where yield curves undergo a variety of slope and curvature changes over time.
TOPICS: Fixed income and structured finance, exchange-traded funds and applications, quantitative methods, statistical methods
Key Findings
▪ Relative to using single durations, the use of key rate durations dramatically improves the ability of an annuity replicating portfolio to provide the desired annuity payments while achieving a zero-ending balance.
▪ This article provides a means for retail investors, or their advisors, to design an annuity that is robust to interest rate changes without paying sizeable fees to life insurance companies and other annuity providers.
- © 2021 Pageant Media Ltd
Don’t have access? Click here to request a demo
Alternatively, Call a member of the team to discuss membership options
US and Overseas: +1 646-931-9045
UK: 0207 139 1600