Hedging Interest Rate Risk in Life Insurance Using Interest Rate Derivatives

Vincenzo Russo ()
Additional contact information
Vincenzo Russo: Head of Group Life and Health Risk Capital Modeling at Generali Group

Chapter Chapter 16 in Derivatives Applications in Asset Management, 2025, pp 265-274 from Springer

Abstract: Abstract This chapter examines how life insurance companies hedge interest-rate risk using swaps as part of their Asset-Liability Management processes. It focuses on mitigating the duration mismatch between long-term liabilities and shorter-term assets by incorporating interest-rate derivatives into the asset portfolio. The illustration demonstrates how a receiver swap can be used to increase asset duration, reducing the duration gap and stabilizing present value of future profits or losses against interest-rate fluctuations. The case emphasizes the importance of effective duration as a metric and the role of optimization in aligning asset and liability sensitivities to market changes.

Keywords: Asset portfolio; Duration gap; Interest-rate hedging; Receiver swaps; Risk management (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

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:spr:sprchp:978-3-031-86354-7_16

Ordering information: This item can be ordered from
http://www.springer.com/9783031863547

DOI: 10.1007/978-3-031-86354-7_16

Access Statistics for this chapter

More chapters in Springer Books from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().