Assessing basis risk in index-based longevity swap transactions

Jackie Ka Ki Li · Johnny Siu‐Hang Li · Chong It Tan · Leonie Tickle

22 citations0/0 files storedAnnals of Actuarial Science

No readable copy stored yet — this record is metadata only.

No open-access location is known for this record yet.

Literature note Cite in a project Citation map

Insurance, Mortality, Demography, Risk Management Insurance and Financial Risk Management Probability and Risk Models

Abstract

Abstract In this paper, we carry out an investigation on modelling basis risk and measuring risk reduction in a longevity hedge constructed by index-based longevity swaps. We derive the fitting procedures of the M7-M5 and common age effect+Cohorts models and define the level of longevity risk reduction. Based on a wide range of hedging scenarios of pension plans, we find that the risk reduction levels are often around 50%–80% for a large plan, while the risk reduction estimates are usually smaller than 50% for a small plan. Moreover, index-based hedging looks more effective under a more precise hedging scheme. We also perform a detailed sensitivity analysis on the hedging results. The most important modelling features are the behaviour of simulated future variability, portfolio size, speed of reaching coherence, data size and characteristics, simulation method, and mortality structural changes.

Paper brief

Loading…

Cite this work

Citation unavailable for this work.

BibTeX RIS CSL-JSON

No public copy is stored for this record, so only the metadata is cited.

Citations in this library

Citation map →

Stored only when both papers are in the corpus — 22 citations exist upstream.

References

2006Analysis of Financial Time Series 1992Modeling and Forecasting U. S. Mortality 2002Analysis of Financial Time Series 2006A Two‐Factor Model for Stochastic Mortality with Parameter Uncertainty: Theory and Calibration 2002A Poisson log-bilinear regression approach to the construction of projected lifetables 2009A Quantitative Comparison of Stochastic Mortality Models Using Data From England and Wales and the United States 2005Coherent mortality forecasts for a group of populations: An extension of the lee-carter method 2008Modelling and management of mortality risk: a review

Cited by

2020On the use of Archimedean copulas for insurance modelling

Explore the map →

Papers that cite the same references — the relational fallback while embeddings are still backfilling.

Imported from OpenAlex (CC0) — nothing here is generated.