Pension risk management with funding and buyout options

Cox, Samuel H.; Lin, Yijia; Shi, Tianxiang

doi:10.1016/j.insmatheco.2017.09.021

Cited by 9 publications

(10 citation statements)

References 32 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Milevsky & Young, 2007;Menoncin, 2008;Horneff et al, 2008Horneff et al, , 2009Horneff et al, , 2010Horneff et al, , 2015Huang et al, 2012;Maurer et al, 2013;Aro & Pennanen, 2017;Rogalla, 2020) • Longevity risk in pension plans, pension systems and annuities (e.g. Aro, 2014;Bisetti & Favero, 2014;Donnelly, 2014;Lin et al, 2014Lin et al, , 2015Lin et al, , 2017aAi et al, 2015;Wan & Bertschi, 2015;Ai et al, 2017;Bravo & El Mekkaoui de Freitas, 2018;Bruszas et al, 2018;Cox et al, 2018;Hsieh et al, 2018;Kurtbegu, 2018;Mayhew et al, 2018;Cox et al, 2020;Dowd et al, 2020) • Longevity inequality (e.g. Mayhew & Smith, 2014Debón et al, 2017;Sanzenbacher et al, 2020).…”

Section: • Landg Executed Buy-ins With the Pearson Pension Plan (£500m mentioning

confidence: 99%

Longevity risk and capital markets: the 2018–19 update

Blake

Cairns²

2020

Ann. actuar. sci.

View full text Add to dashboard Cite

Section: • Landg Executed Buy-ins With the Pearson Pension Plan (£500m mentioning

confidence: 99%

Longevity risk and capital markets: the 2018–19 update

Blake

Cairns²

2020

Ann. actuar. sci.

View full text Add to dashboard Cite

“…They develop a benchmark pricing model for both pension buy-ins and buyouts under the independence assumption between financial and insurance markets. Furthermore, Cox et al (2018) investigate how to make pension buyout contracts more affordable for underfunded DB plans as these contracts can be very expensive when the pension fund runs a deficit. Arik et al (2018) investigate pricing pension buyouts by considering a specific dependence structure between mortality and interest rate risk.…”

Section: Introductionmentioning

confidence: 99%

“…From the DB pension schemes’ point of view, pension buyouts provide more freedom, allowing the DB plan sponsors to take on more risky projects with high positive net present values. This creates added value compared to other financial contracts that can be used to hedge annuities, such as longevity swaps (Cox et al ., 2018).…”

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

The impact of simultaneous shocks to financial markets and mortality on pension buy-out prices

2023

View full text Add to dashboard Cite

In this paper, we determine the fair value of a pension buyout contract under the assumption that changes in mortality can have an impact on financial markets. Our proposed model allows for shocks to occur simultaneously in mortality rates and financial markets, so that strong changes in mortality rates can affect interest rates and asset prices. This approach challenges the common but very strong assumption that mortality and market risk drivers are independent. A simulation-based pricing framework is applied to determine the buyout premium for a hypothetical fully funded pension scheme. The results of an extensive sensitivity analysis show how buyout prices are affected by changes in mortality and financial markets. Surprisingly, we find that the impact of shocks is similar whether or not these shocks occur simultaneously or not, although there are some differences in annuity prices and buyout premiums. We clearly see that the intensity and severity of shocks, and asset price volatility play a dominant role for buyout prices.

show abstract

“…Furthermore, this might be a huge problem as it states that ln(m(x, t)) � α x + β x * κ t is dependent completely when both are calculated through the similar random variable k t , which are central death rates that are dependent across all age groups with the assumption of ln(m(x, t)) and ln(m(x, t − 1)) being dependent. Tis assumption becomes important when determined by the similar mortality trend k t since the rates are independent across all ages t [9][10][11] and [12].…”

Section: Introductionmentioning

confidence: 99%

Deep Learning Incorporated Bühlmann Credibility in the Modified Lee–Carter Mortality Model

Odhiambo

2023

Mathematical Problems in Engineering

View full text Add to dashboard Cite

This research study proposes the inclusion of randomness or an error term in the modified Lee–Carter model, which improves the traditional Lee–Carter model for modeling and forecasting mortality risk for years in the actuarial science field. While the modified Lee–Carter model points out some of its common shortcomings , it has no distributional assumption that has been placed on the error/disturbance term. Incorporating a Gaussian distributional assumption on the error term is proposed, and then, the deep learning technique is used to obtain the parameter estimates. It is a departure from the traditional singular value decomposition estimation technique for estimating the parameters in the model. Finally, the Bühlmann credibility approach is incorporated into the model to determine its forecasting precision compared to the classical Lee–Carter model before applied in actuarial valuations.

show abstract

Pension risk management with funding and buyout options

Cited by 9 publications

References 32 publications

Longevity risk and capital markets: the 2018–19 update

Longevity risk and capital markets: the 2018–19 update

The impact of simultaneous shocks to financial markets and mortality on pension buy-out prices

Deep Learning Incorporated Bühlmann Credibility in the Modified Lee–Carter Mortality Model

Contact Info

Product

Resources

About