Defined terms for the annuity market and lifetime income landscape.
Actuarial fairness is the principle that each participant in a lifetime income arrangement contributes a premium that exactly equals the expected present value of the benefits they will receive, with no implicit cross-subsidy between participants of different risk profiles.
Actuarial present value is the present value of a stream of future payments that depend on the recipient's survival, calculated by discounting each future payment to today and weighting it by the probability that the recipient is alive to receive 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.
Adjustment mechanism is the structural property of a claim that specifies what changes when conditions change and who controls the change, with four possible values: automatic-actuarial, fixed-contractual, discretionary, or manual-individual.
