Securitization of Longevity Risk: Pricing Survivor Bonds With Wang Transform in the Lee-Carter Framework
AbstractLongevity risk is a major issue for insurers and pension funds, especially in the selling of annuity products. In that respect, securitization of this risk could offer great opportunities for hedging. This article proposes to design survivor bonds which could be issued directly by insurers. In order to guaranty some transparency in the product, the survivor bond is based on a public mortality index. The classical Lee-Carter model for mortality forecasting is used to price a risky coupon survivor bond based on this index. Copyright The Journal of Risk and Insurance, 2007.
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Bibliographic InfoArticle provided by The American Risk and Insurance Association in its journal Journal of Risk & Insurance.
Volume (Year): 74 (2007)
Issue (Month): 1 ()
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- Tsai, Jeffrey T. & Wang, Jennifer L. & Tzeng, Larry Y., 2010. "On the optimal product mix in life insurance companies using conditional value at risk," Insurance: Mathematics and Economics, Elsevier, vol. 46(1), pages 235-241, February.
- Shen, Yang & Siu, Tak Kuen, 2013. "Longevity bond pricing under stochastic interest rate and mortality with regime-switching," Insurance: Mathematics and Economics, Elsevier, vol. 52(1), pages 114-123.
- Lee, Yung-Tsung & Wang, Chou-Wen & Huang, Hong-Chih, 2012. "On the valuation of reverse mortgages with regular tenure payments," Insurance: Mathematics and Economics, Elsevier, vol. 51(2), pages 430-441.
- Blake, David & Brockett, Patrick & Cox, Samuel & MacMinn, Richard, 2011. "Longevity risk and capital markets: The 2009-2010 update," MPRA Paper 28868, University Library of Munich, Germany.
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