2006
DOI: 10.1111/j.1539-6975.2006.00163.x
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Survivor Swaps

Abstract: A survivor swap (SS) is an agreement to exchange cash flows in the future based on the outcome of at least one survivor index. This article discusses the possible uses of SSs as instruments for managing, hedging, and trading mortality-dependent risks. SSs are especially useful for insurance companies, but also offer other interested parties low beta avenues into the acquisition of mortality risk exposure. The article also investigates vanilla SSs in some detail, and suggests how their premiums and values might… Show more

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Cited by 172 publications
(148 citation statements)
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“…If we accept this line of reasoning, then the sets of b distribution parameters presented in Table 1 of Dowd et al (2006) lead us to believe that the most plausible representation of mortality given in that Table is their case 1: this is where (i) has a zero mean and a standard deviation of around 2.2%, and this occurs where the b distribution has parameters a ϭ b Ϸ 1,000. Thus, if we accept this example as plausible, 3 we might expect the parameters of the b distribution to be both high and approximately equal to each other.…”
Section: The Distribution Of Survivor Swap Premiumsmentioning
confidence: 99%
See 4 more Smart Citations
“…If we accept this line of reasoning, then the sets of b distribution parameters presented in Table 1 of Dowd et al (2006) lead us to believe that the most plausible representation of mortality given in that Table is their case 1: this is where (i) has a zero mean and a standard deviation of around 2.2%, and this occurs where the b distribution has parameters a ϭ b Ϸ 1,000. Thus, if we accept this example as plausible, 3 we might expect the parameters of the b distribution to be both high and approximately equal to each other.…”
Section: The Distribution Of Survivor Swap Premiumsmentioning
confidence: 99%
“…, (t). Dowd (2005, p. 5) then suggests that the longevity shocks (1), (2) The premium p is set so that the initial value of the swap is zero, and, in the case of a the simple vanilla swaps considered in Dowd et al (2006), this implies that (22) where is the value of the fixed leg and is the value of the floating leg, and l i is the probability of survival to i. Equation (22) tells us that, in general, the swap premium is related to a weighted average of the expectation of n Ϫ 1 independent (i) shocks, each of which follows a transformed b distribution.…”
Section: The Distribution Of Survivor Swap Premiumsmentioning
confidence: 99%
See 3 more Smart Citations