Information effects in longevity-linked vs purely financial portfolios
Elisa Luciano () and
Antonella Tolomeo ()
Additional contact information
Antonella Tolomeo: University of Turin
No 160, CeRP Working Papers from Center for Research on Pensions and Welfare Policies, Turin (Italy)
The development of a market for longevity bonds is considered beneficial to investors, because it offers diversification opportunities. However, understanding of both longevity and interest rate risks is required to rationally invest in longevity bonds. This paper models the optimal behavior of an investor facing the choice between a traditional and a longevity bond. When buying longevity bonds, he can decide to pay a fee and separate the information on di fferent risks affecting its bond value, or to remain uninformed and receive a non-separating signal. The uninformed investor optimally filters his pooled signal. The paper provides conditions under which the optimal portfolio choice is the longevity bond and conditions under which diversification is not beneficial. A calibrated example is provided.
References: Add references at CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
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:crp:wpaper:160
Access Statistics for this paper
More papers in CeRP Working Papers from Center for Research on Pensions and Welfare Policies, Turin (Italy) Contact information at EDIRC.
Bibliographic data for series maintained by Silvia Maero ().