Relative Hedging of Systematic Mortality Risk

Michael Ludkovski and Erhan Bayraktar

North American Actuarial Journal, 2009, vol. 13, issue 1, 106-140

Abstract: We study indifference valuation mechanisms for mortality contingent claims under stochastic mortality age structures. Our focus is on capturing the internal cross-hedge between components of an insurer’s portfolio, especially between life annuities and life insurance. We carry out an exhaustive analysis of the dynamic exponential premium principle, which is the representative nonlinear valuation rule in our framework. Using this valuation rule we derive formulas for optimal quantity of contracts to sell. Our results are further enhanced by asymptotic expansions that show the relative effects of model parameters. We also compare the exponential premium principle to other valuation rules. Furthermore, we provide numerical examples to illustrate our approach.

Date: 2009
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://hdl.handle.net/10.1080/10920277.2009.10597542 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:uaajxx:v:13:y:2009:i:1:p:106-140

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/uaaj20

DOI: 10.1080/10920277.2009.10597542

Access Statistics for this article

North American Actuarial Journal is currently edited by Kathryn Baker

More articles in North American Actuarial Journal from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().