Securitization of Longevity Risk in Pension Annuities

Author

Shang, Qin ; Qin, Xuezhi

Author_Institution

Sch. of Manage., Dalian Univ. of Technol., Dalian

fYear

2008

fDate

12-14 Oct. 2008

Firstpage

1

Lastpage

4

Abstract

Longevity risk is an important risk factor for payments of pension annuities. Securitization of this risk can offer great opportunities for hedging. The purpose of this article is to design longevity bonds, payments of which depend on the survival index of a certain population. Considering characteristics of the people survival and interest rates market, Feller process with jumps is used to model the death intensity to get a survival function. And the interest rate is described with Cox-Ingersoll-Ross(CIR) model. Due to the CAPM pricing methods rarely suit to the hypotheses of complete market, the paper uses Wang transform to value the bond in an incomplete market framework Finally, empirical study is conducted with data of Chinese life table.

Keywords

pensions; pricing; risk analysis; security of data; transforms; Cox-Ingersoll-Ross model; Wang transform; longevity risk; payments; pension annuities; pricing; securitization; Aging; Biological system modeling; Cost accounting; Economic indicators; Mathematical model; Pensions; Pricing; Risk management; Stochastic processes; Technology management;

fLanguage

English

Publisher

ieee

Conference_Titel

Wireless Communications, Networking and Mobile Computing, 2008. WiCOM '08. 4th International Conference on

Conference_Location

Dalian

Print_ISBN

978-1-4244-2107-7

Electronic_ISBN

978-1-4244-2108-4

Type

conf

DOI

10.1109/WiCom.2008.2285

Filename

4680474