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Discounting the Discounted Projection Approach

Buckner, D.; Dowd, K.

Discounting the Discounted Projection Approach Thumbnail


D. Buckner


UK equity release actuaries are using a flawed approach to value the no-negative equity guarantees in their equity release mortgages. The approach they use, the Discounted Projection approach, incorrectly uses projected future house prices as the underlying prices in their put option pricing equations. The correct approach uses forward house prices. The Discounted Projection approach entails significant under-valuations of no negative equity guarantees and over-valuations of equity release mortgages and can produce valuations that violate rational pricing principles. The Discounted Projection approach is also inconsistent with both actuarial and accounting standards. Our results have significant ramifications for equity release industry practice and prudential regulation.


Buckner, D., & Dowd, K. (2022). Discounting the Discounted Projection Approach. North American Actuarial Journal, 26(4), 521-536.

Journal Article Type Article
Acceptance Date Apr 8, 2021
Online Publication Date Jun 11, 2021
Publication Date 2022
Deposit Date Apr 9, 2021
Publicly Available Date Dec 8, 2022
Journal North American Actuarial Journal
Print ISSN 1092-0277
Electronic ISSN 2325-0453
Publisher Taylor and Francis Group
Peer Reviewed Peer Reviewed
Volume 26
Issue 4
Pages 521-536
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Published Journal Article (745 Kb)

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Copyright Statement
© 2021 The Author(s). Published with license by Taylor and Francis Group, LLC
This is an Open Access article distributed under the terms of the Creative Commons Attribution-NonCommercial-NoDerivatives License (, which permits non-commercial re-use, distribution, and reproduction in any medium, provided the original work is properly cited, and is not altered, transformed, or built upon in any way.

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