2014
DOI: 10.1080/10920277.2013.873708
|View full text |Cite
|
Sign up to set email alerts
|

Modeling and Pricing Longevity Derivatives Using Stochastic Mortality Rates and the Esscher Transform

Abstract: The Lee-Carter mortality model provides a structure for stochastically modeling mortality rates incorporating both time (year) and age mortality dynamics. Their model is constructed by modeling the mortality rate as a function of both an age and a year effect. Recently the MBMM model (Mitchell et al. 2013) showed the Lee Carter model can be improved by fitting with the growth rates of mortality rates over time and age rather than the mortality rates themselves. The MBMM modification of the Lee-Carter model per… Show more

Help me understand this report

Search citation statements

Order By: Relevance

Paper Sections

Select...
1
1
1
1

Citation Types

0
12
0
2

Year Published

2015
2015
2024
2024

Publication Types

Select...
8
1

Relationship

0
9

Authors

Journals

citations
Cited by 25 publications
(14 citation statements)
references
References 23 publications
0
12
0
2
Order By: Relevance
“…It thus warrants a separate study to investigate how much the proposed risk management methods may cost. To determine the cost associated with the dynamic longevity hedge, one may replace qthinmathspacef with a forward mortality rate that is derived from the pricing methods proposed by Chuang and Brockett (), Li, Ng, and Chan (), Deng, Brockett, and MacMinn (2012) and Li and Hardy (). As a reinsurance treaty, the customized surplus swap may be priced under the Solvency II framework.…”
Section: Discussionmentioning
confidence: 99%
“…It thus warrants a separate study to investigate how much the proposed risk management methods may cost. To determine the cost associated with the dynamic longevity hedge, one may replace qthinmathspacef with a forward mortality rate that is derived from the pricing methods proposed by Chuang and Brockett (), Li, Ng, and Chan (), Deng, Brockett, and MacMinn (2012) and Li and Hardy (). As a reinsurance treaty, the customized surplus swap may be priced under the Solvency II framework.…”
Section: Discussionmentioning
confidence: 99%
“…In an incomplete market, a critical step in performing risk-neutral valuation is to identify a risk-neutral probability measure, under which prices of mortality bonds can be computed. Although this step can be accomplished by methods such as the Wang transform (see, e.g., Chen and Cox, 2009) and the Esscher transform (see, e.g., Chuang and Brockett, 2014), we consider the method of canonical valuation, which can be implemented readily with the model variants we consider.…”
Section: Pricing Methodologymentioning
confidence: 99%
“…• Design and pricing of longevity-linked derivatives (e.g. Shang et al, 2011;Lin et al, 2013;Wang & Yang, 2013;Chuang & Brockett, 2014) and specifically survivor/longevity swaps (e.g. Dowd et al, 2006;Wang et al, , 2015, survivor/longevity forwards and swaptions (e.g.…”
Section: • Landg Executed Buy-ins With the Pearson Pension Plan (£500m mentioning
confidence: 99%