A DCC-GARCH multi-population mortality model and its applications to pricing catastrophic mortality bonds

Zihe Wang and Johnny Siu-Hang Li

Finance Research Letters, 2016, vol. 16, issue C, 103-111

Abstract: This paper considers the pricing problem of catastrophic mortality bonds, which have been traded among financial institutions since about 10 years ago. We first use a DCC-GARCH model to capture the evolution of the aggregate mortality rates for five developed countries jointly. We then utilize the estimated model to price an illustrative catastrophic mortality bond, which, similar to most of the existing catastrophic mortality bonds, is linked to the mortality of multiple populations. We also study the impact of various features of the DCC-GARCH model on the pricing results.

Keywords: Actuarial science; Non-linear time-series; Mortality/longevity risk; Securitization; Risk-cubic pricing (search for similar items in EconPapers)
JEL-codes: C01 C22 G22 G23 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:16:y:2016:i:c:p:103-111

DOI: 10.1016/j.frl.2015.10.004

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