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Longevity Modelling and Pricing under a Dependent Multi-Cohort Framework

Author

Listed:
  • Zeddouk, Fadoua

    (Université catholique de Louvain, LIDAM/ISBA, Belgium)

  • Devolder, Pierre

    (Université catholique de Louvain, LIDAM/ISBA, Belgium)

Abstract

We propose a multi-cohort model that is able to capture the mortality correlation between different cohorts. The model is based on the Hull and White process to which we incorporate inter-generational risk factors, by modifying its stochastic part. We provide a pricing framework for a new survival forward contract under the Cost of Capital, risk-neutral and Sharpe approaches, allowing to cover the global multi-cohort longevity risk. We give numerical illustrations for Belgian cohorts, and we compute the price of the longevity derivative under the proposed methods, for different correlation levels

Suggested Citation

  • Zeddouk, Fadoua & Devolder, Pierre, 2020. "Longevity Modelling and Pricing under a Dependent Multi-Cohort Framework," LIDAM Reprints ISBA 2020036, Université catholique de Louvain, Institute of Statistics, Biostatistics and Actuarial Sciences (ISBA).
    • Handle: RePEc:aiz:louvar:2020036
    DOI: https://doi.org/10.3390/risks8040121
    Note: In: Risks - Vol. 8, no.4, p. 121 (2020)
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