2010
DOI: 10.1002/fut.20500
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On the calibration of mortality forward curves

Abstract: In 2007, a major investment bank launched a product called "q-forward," which may be regarded as a forward contract on a mortality rate. The pricing of mortality forwards is similar to the pricing of other forward-rate contracts, such as interest-rate forwards or foreign exchange forwards. In particular, since investors require compensation to take on longevity risk, the forward mortality rate at which q-forward contracts will trade will be smaller than the expected mortality rate. The relationship between the… Show more

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Cited by 6 publications
(3 citation statements)
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“…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%
“…They do not distinguish the difference of the expected mortality rate and the fixed rate, so adapting their approach to calculate the premium under the LLMA model structure is not clear. Li et al (2011) apply the canonical valuation to the q-forward pricing (see Stutzer 1996). Their mortality rate modeling is constructed on the mortality odds proposed by Cairns et al (2006).…”
Section: The Fixed Ratementioning
confidence: 99%
“…In the past decades, the type of mortality‐linked securities (e.g., longevity bonds, q ‐forwards, survivor swaps, annuity futures, mortality options, and survivor caps) to manage longevity or mortality risks has been proposed, for example, Milevsky and Promislow (2001), Menoncin (2008), Dawson et al (2009), Lin and Tzeng (2010), Li et al (2011), Lin and Tsai (2016), and Schmeck and Schmidli (2021). In the practitioner community, JP Morgan has set up LifeMetrics for the purpose of building a liquid market for longevity derivatives since 2007.…”
Section: Introductionmentioning
confidence: 99%