A Multivariate Model of Strategic Asset Allocation with Longevity Risk

Emilio Bisetti, Carlo Favero (), Giacomo Nocera and Claudio Tebaldi
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Giacomo Nocera: Audencia Business School

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Abstract: Population-wide increase in life expectancy is a source of aggregate risk. Longevity-linked securities are a natural instrument to reallocate that risk. This paper extends the standard Campbell–Viceira (2005) strategic asset allocation model by including a longevity-linked investment possibility. Model estimation, based on prices for standardized annuities publicly offered by U.S. insurance companies, shows that aggregate shocks to survival probabilities are predictors for long-term returns of the longevity-linked securities, and reveals an unexpected predictability pattern. Valuation of longevity risk premium confirms that longevity-linked securities offer inexpensive funding opportunities to asset managers.

Date: 2017-10
New Economics Papers: this item is included in nep-age and nep-rmg
Note: View the original document on HAL open archive server: https://audencia.hal.science/hal-01633544
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Published in Journal of Financial and Quantitative Analysis, 2017, 52 (05), pp.2251 - 2275. ⟨10.1017/S0022109017000692⟩

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Related works:
Journal Article: A Multivariate Model of Strategic Asset Allocation with Longevity Risk (2017)
Working Paper: A Multivariate Model of Strategic Asset Allocation with Longevity Risk (2015)
Working Paper: A Multivariate Model of Strategic Asset Allocation with Longevity Risk (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01633544

DOI: 10.1017/S0022109017000692

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