Defined terms for the annuity market and lifetime income landscape.
An absorbing barrier is a state that, once reached, cannot be left — a process that crosses the barrier stays there permanently, with the subsequent dynamics no longer accessible to it.
Additive dynamics describes the kind of process — common in cash flows and ordinary accumulations — where each period adds to or subtracts from the previous period's value without compounding, so that the order in which the changes happen does not affect where the running total ends up.
An arithmetic mean is the ordinary average — the sum of a set of values divided by how many values there are.
An ensemble average is the average of an outcome's values across many parallel agents or systems at a single moment in time, treated as a measure of the cross-section of the population at that moment.
An ensemble-average return is the arithmetic mean per-period return computed across many parallel investment paths at a single moment, equivalent to the expected return under standard portfolio theory.
