Keywords and Phrases
additive mortality; longevity risk; risk- neutral; securitization; stochastic interest rates
"Longevity risk is the risk that a reference population’s mortality rates deviate from what is projected from prior life tables. This is due to discoveries in biological sciences, improved public health measures, and nutrition, which have dramatically increased life expectancy. Longevity risk raises life insurers’ liability, increasing product costs and reserves. Securitization through longevity derivatives is a way of dealing with this risk.
To enhance the pricing of life contingent products, we present an additive type mortality model in the style of the Lee-Carter. This model incorporates policyholder covariates. By using counting processes and martingale machinery, we obtain close form representations for the model’s unknowns. We use the bond pricing approach from Wills and Sherris (2010) to price longevity bonds with this mortality model. Numerical studies suggest that asymptotic properties of model parameter estimators provide a close approximation of the true.
Pricing longevity derivatives uses a no-arbitrage approach by risk-adjusting the mortality and/or interest rate risks. There are various ways to calibrate the risk-adjusted probability measure. The risk neutral approach and the Wang transform are among the popular methods. In this work, we employ a mean-reverting Hull-White model with a moving target which was recently proposed by Zeddouk and Devolder (2020) for the mortality model and the Vasicek model for evolution of interest rate. We detail how to develop the risk-neutral measure in pricing longevity bonds"--Abstract, page iv.
Samaranayake, V. A.
Wen, Xuerong Meggie
Enke, David Lee, 1965-
Mathematics and Statistics
Ph. D. in Mathematics
Missouri University of Science and Technology
Journal article titles appearing in thesis/dissertation
- Securitization of longevity risk via tranche- based survivor bonds.
- Longevity bond pricing with Hull-White mortality model.
x, 100 pages
© 2022 Priscilla Mansah Codjoe, All rights reserved.
Dissertation - Open Access
Electronic OCLC #
Codjoe, Priscilla Mansah, "Survivor bond models for securitizing longevity risk" (2022). Doctoral Dissertations. 3166.