Longevity Bonds: Financial Engineering, Valuation, and Hedging

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

180 citations recorded by the source corpus.

This article examines the main characteristics of longevity bonds (LBs) and shows that they can take a large variety of forms which can vary enormously in their sensitivities to longevity shocks. We examine different ways of financially engineering LBs and consider problems arising from the dearth of ultra-long government bonds and the choice of the reference population index. The article also looks at valuation issues in an incomplete markets context and finishes with an examination of how LBs can be used as a risk management tool for hedging longevity risks.

Subfields: Accounting, Demography, General Health Professions

View Paper: https://www.semanticscholar.org/paper/a00c138460cdad7bb9508f949c864c6f518e8f1e

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Accounting

1. Andrew Ngai
2. Elena Vigna
3. Elisa Luciano
4. Michael Sherris
5. Guohui Guan
6. Zongxia Liang
7. F. Menoncin

In Demography

1. Luca Regis
2. Daniel Bauer
3. Elisa Luciano
4. Elena Vigna
5. Jochen Russ
6. Andrew Ngai
7. Michael Sherris
8. M. Börger

In General Health Professions

1. Jochen Russ
2. Luca Regis
3. Andrew Ngai
4. Daniel Bauer
5. Elena Vigna
6. Elisa Luciano
7. Michael Sherris
8. M. Börger

Citations in the corpus

• Longevity Bond Premiums: The Extreme Value Approach and Risk Cubic Pricing (2010, unknown): “Third, the EIB bond design exposed the hedger to the direct credit risk of the EIB and the indirect credit risk of BNP Paribas and Partner 7 Further details are provided in Blake et al. (2006a).”
• On the pricing of longevity-linked securities (2010, background): “isolating the cash flows that are linked to longevity risk and repackaging them into cash flows that are traded in capital markets (see Cowley and Cummins (2005) for an overview of securitization in life insurance). In academic literature, several supporting instruments such as so-called longevity o”
• Delta–Gamma hedging of mortality and interest rate risk (2012, methodology): “Cairns, Blake, and Dowd (2006) add that no one of the previous criteria dominates the others.”
• Mortality Risk Modeling: Applications to Insurance Securitization (2010, unknown): “As an application to mortality risk management, Blake et al. (2006) examine a wide variety of longevity bonds.”
• Demographic Issues in Longevity Risk Analysis (2006, unknown): “Actuarial (Cox, Lin, and Wang, 2006; Cairns, Blake, and Dowd, 2006), economic (Turner, 2006; Brown and Orszag, 2006), and financial issues (Blake et al., 2006; Milevsky, Promislow, and Young, 2006) are addressed elsewhere in this issue of the Journal of Risk and Insurance.”
• Longevity risk management for life and variable annuities: The effectiveness of static hedging using longevity bonds and derivatives (2011, background): “Deferred longevity bonds have also been proposed (Blake et al (2006, 2009) [5, 8]).”
• The New Life Market (2013, unknown): “org 23 This is the same stage that we argued the market was just starting in Blake et al. (2008a). 0.”