If we can simulate it, we can insure it: An application to longevity risk management
M. Martin Boyer () and
Lars Stentoft ()
Insurance: Mathematics and Economics, 2013, vol. 52, issue 1, 35-45
This paper proposes a unified framework for measuring and managing longevity risk. Specifically, we develop a flexible framework for valuing survivor derivatives like forwards, and swaps, as well as options both of European and American style. Our framework is essentially independent of the assumed underlying dynamics and the choice of method for risk neutralization and relies only on the ability to simulate from the risk neutral process. We provide an application to derivatives on the survivor index when the underlying dynamics are from a Lee–Carter model. Our results show that taking the optionality into consideration is important from a pricing perspective.
Keywords: Least squares Monte Carlo; Longevity risk; Reinsurance; Simulation (search for similar items in EconPapers)
JEL-codes: G22 G23 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9) Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
Working Paper: If we can simulate it, we can insure it: An application to longevity risk management (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:insuma:v:52:y:2013:i:1:p:35-45
Access Statistics for this article
Insurance: Mathematics and Economics is currently edited by R. Kaas, Hansjoerg Albrecher, M. J. Goovaerts and E. S. W. Shiu
More articles in Insurance: Mathematics and Economics from Elsevier
Bibliographic data for series maintained by Haili He ().