Fixed income securities with a zero Macaulay duration: senior life settlements
AbstractSenior life settlements belong to the family of fixed income securities, however, because of the negative stream of cash flows generated by the payment of yearly premia p and the only one positive lump sum received at death of the senior life settler, contrary to the other fixed income securities, senior life settlements, under certain conditions, can achieve a zero Macaulay duration. Investors interested in a hedged portfolio against interest risk could purchase such life settlements. We develop the conditions for which a zero Macaulay duration is obtained.
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Bibliographic InfoArticle provided by Taylor and Francis Journals in its journal Applied Financial Economics Letters.
Volume (Year): 4 (2008)
Issue (Month): 3 ()
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Web page: http://www.tandf.co.uk/journals/titles/17446546.asp
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