Mortality-dependent financial risk measures

By Kevin Dowd, Andrew J. G. Cairns, David P. Blake. 2006

50 citations recorded by the source corpus.

Abstract This paper uses a recently developed two-factor stochastic mortality model to estimate financial risk measures for four illustrative types of mortality-dependent financial position: investments in zero-coupon longevity bonds; investments in longevity bonds that pay annual survivor-dependent coupons; and two examples of an insurer's annuity book that are each hedged by a longevity bond, one based on the annuity book and hedge having the same reference cohort, and the other not. The risk measures estimated are the value-at-risk, the expected shortfall and a spectral risk measure based on an exponential risk-aversion function. Results are reported on a model calibrated on data provided by the UK Government Actuary's Department, both with and without underlying parameter uncertainty.

Subfields: Demography, General Health Professions, Health

View Paper: https://www.semanticscholar.org/paper/3d252ded4dd1f3e0b79fc813678fd3d5e24deab7

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Citations in the corpus

Longevity risk management for life and variable annuities: The effectiveness of static hedging using longevity bonds and derivatives (2011, methodology): “The methodology used is based on Bauer and Weber (2008) [2] and Dowd et al (2006) [21].”
Longevity Bonds: Financial Engineering, Valuation, and Hedging (2006, unknown): “16 A LS is a swap involving an exchange of one or more payments over a set term, at least one leg of which is linked to the realized value of a survivor index (Cox and Lin, 2004; Lin and Cox, 2005; or Dowd et al., 2006b).”
Living with Mortality: Longevity Bonds and Other Mortality-Linked Securities (2006, background): “3 Mortality swaps could take many different forms, and are discussed in some detail by Cox & Lin (2004), Lin & Cox (2005) and by Dowd et al. (2006a).”
A Quantitative Comparison of Stochastic Mortality Models Using Data From England and Wales and the United States (2009, background): “…risk, for providing benchmarks for longevity-linked financial instruments (Blake and Burrows 2001; Blake, Cairns, and Dowd 2006; Blake et al. 2006; Dowd et al. 2006; Dawson et al. 2007), for pricing such instruments (Cairns, Blake, and Dowd 2006a,b), and for using these instruments for hedging…”