Systematic and non-systematic mortality risk in pension portfolios
AbstractWe study the effects of non-systematic and systematic mortality risks on the required initial capital in a pension plan, in the presence of financial risks. We discover that for a pension plan with few members the impact of pooling on the required capital per person is strong, but non-systematic risk diminishes rapidly as the number of members increases. Systematic mortality risk, on the other hand, is a significant source of risk is a pension portfolio.
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Bibliographic InfoPaper provided by arXiv.org in its series Papers with number 1307.8020.
Date of creation: Jul 2013
Date of revision: Jul 2013
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Web page: http://arxiv.org/
This paper has been announced in the following NEP Reports:
- NEP-AGE-2013-08-05 (Economics of Ageing)
- NEP-ALL-2013-08-05 (All new papers)
- NEP-RMG-2013-08-05 (Risk Management)
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- M. A. Milevsky & S. D. Promislow & V. R. Young, 2006. "Killing the Law of Large Numbers: Mortality Risk Premiums and the Sharpe Ratio," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 73(4), pages 673-686.
- Olivieri, Annamaria, 2001. "Uncertainty in mortality projections: an actuarial perspective," Insurance: Mathematics and Economics, Elsevier, vol. 29(2), pages 231-245, October.
- 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.
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