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A combined analysis of hedge effectiveness and capital efficiency in longevity hedging

Author

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  • Börger, Matthias
  • Freimann, Arne
  • Ruß, Jochen

Abstract

By hedging longevity exposures, annuity providers can reduce both the uncertainty in future cash flows and capital charges in a cost efficient manner. We argue that a separate analysis of these two aspects cannot provide a full picture of the implications of longevity hedging, in particular when using index-based instruments.

Suggested Citation

  • Börger, Matthias & Freimann, Arne & Ruß, Jochen, 2021. "A combined analysis of hedge effectiveness and capital efficiency in longevity hedging," Insurance: Mathematics and Economics, Elsevier, vol. 99(C), pages 309-326.
  • Handle: RePEc:eee:insuma:v:99:y:2021:i:c:p:309-326
    DOI: 10.1016/j.insmatheco.2021.03.023
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    References listed on IDEAS

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    More about this item

    Keywords

    Hedging longevity risk; Hedge effectiveness; Capital efficiency; Solvency regimes; Population basis risk;
    All these keywords.

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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