Longevity Modelling and Pricing under a Dependent Multi-Cohort Framework

Fadoua Zeddouk () and Pierre Devolder ()
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Fadoua Zeddouk: Université catholique de Louvain, LIDAM/ISBA, Belgium
Pierre Devolder: Université catholique de Louvain, LIDAM/ISBA, Belgium

No 2020036, LIDAM Reprints ISBA from Université catholique de Louvain, Institute of Statistics, Biostatistics and Actuarial Sciences (ISBA)

Abstract: We propose a multi-cohort model that is able to capture the mortality correlation between different cohorts. The model is based on the Hull and White process to which we incorporate inter-generational risk factors, by modifying its stochastic part. We provide a pricing framework for a new survival forward contract under the Cost of Capital, risk-neutral and Sharpe approaches, allowing to cover the global multi-cohort longevity risk. We give numerical illustrations for Belgian cohorts, and we compute the price of the longevity derivative under the proposed methods, for different correlation levels

Keywords: multi-cohort; longevity hedging; survival forward; Cost of Capital (search for similar items in EconPapers)
Date: 2020-11-16
Note: In: Risks - Vol. 8, no.4, p. 121 (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:aiz:louvar:2020036

DOI: 10.3390/risks8040121

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