Securitization of Longevity Risk: Pricing Survivor Bonds With Wang Transform in the Lee‐Carter Framework

Michel Denuit, Pierre Devolder and Anne‐Cécile Goderniaux

Journal of Risk & Insurance, 2007, vol. 74, issue 1, 87-113

Abstract: Longevity risk is a major issue for insurers and pension funds, especially in the selling of annuity products. In that respect, securitization of this risk could offer great opportunities for hedging. This article proposes to design survivor bonds which could be issued directly by insurers. In order to guaranty some transparency in the product, the survivor bond is based on a public mortality index. The classical Lee‐Carter model for mortality forecasting is used to price a risky coupon survivor bond based on this index.

Date: 2007
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https://doi.org/10.1111/j.1539-6975.2007.00203.x

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Persistent link: https://EconPapers.repec.org/RePEc:bla:jrinsu:v:74:y:2007:i:1:p:87-113

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