Pricing q-forward contracts: an evaluation of estimation window and pricing method under different mortality models

Pauline Barrieu and Luitgard A. M. Veraart

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: The aim of this paper is to study the impact of various sources of uncertainty on the pricing of a special longevity–based instrument: a q-forward contract. At the expiry of a q-forward contract, the realized mortality rate for a given population is exchanged in return for a fixed (mortality) rate that is agreed at the initiation of the contract. Pricing a q-forward involves determining this fixed rate. In our study, we disentangle three main sources of uncertainty and consider their impact on pricing: model choice for the underlying mortality rate, time-window used for estimation and the pricing method itself.

Keywords: longevity risk; q-forward; model uncertainty; estimation window; pricing method (search for similar items in EconPapers)
JEL-codes: C1 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (3)

Published in Scandinavian Actuarial Journal, 2016, 2016(2), pp. 146-166. ISSN: 0346-1238

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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:58742

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