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Securitization of Longevity and Mortality Risk

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    Abstract

    This paper deals with Alternative Risk Transfer (ART) through the securitization of longevity and mortality risks in pension plans and commercial life insurance. Various types of such mortality-linked securities are described (e.g., CATM bonds, longevity bonds, mortality forwards and futures, and mortality swaps). Pricing methods and real examples are given. Hypothetical calculations concerning the pricing of potential mortality forwards that correspond to the evolution of longevity in the Czech Republic are presented.

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    File URL: http://journal.fsv.cuni.cz/storage/1201_str_545_560_-_cipra.pdf
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    Bibliographic Info

    Article provided by Charles University Prague, Faculty of Social Sciences in its journal Finance a uver - Czech Journal of Economics and Finance.

    Volume (Year): 60 (2010)
    Issue (Month): 6 (December)
    Pages: 545-560

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    Handle: RePEc:fau:fauart:v:60:y:2010:i:6:p:545-560

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    Related research

    Keywords: ART; life insurance; life market; longevity risk; mortality risk; pension plans; securitization; tontines;

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    1. Pablo Antolín & Hans J. Blommestein, 2007. "Governments and the Market for Longevity-Indexed Bonds," OECD Working Papers on Insurance and Private Pensions 4, OECD Publishing.
    2. Hári, Norbert & De Waegenaere, Anja & Melenberg, Bertrand & Nijman, Theo E., 2008. "Longevity risk in portfolios of pension annuities," Insurance: Mathematics and Economics, Elsevier, vol. 42(2), pages 505-519, April.
    3. Cannon, Edmund & Tonks, Ian, 2008. "Annuity Markets," OUP Catalogue, Oxford University Press, number 9780199216994.
    4. Blake, David & Dowd, Kevin & Cairns, Andrew J.G., 2008. "Longevity risk and the Grim Reaper's toxic tail: The survivor fan charts," Insurance: Mathematics and Economics, Elsevier, vol. 42(3), pages 1062-1066, June.
    5. David Blake & Andrew Cairns & Kevin Dowd & Richard MacMinn, 2006. "Longevity Bonds: Financial Engineering, Valuation, and Hedging," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 73(4), pages 647-672.
    6. Blake, David & Boardman, Tom & Cairns, Andrew, 2010. "Sharing longevity risk: Why governments should issue longevity bonds," MPRA Paper 34184, University Library of Munich, Germany.
    7. Kevin Dowd & David Blake & Andrew J. G. Cairns & Paul Dawson, 2006. "Survivor Swaps," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 73(1), pages 1-17.
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