Single and cross-generation natural hedging of longevity and financial risk

Elisa Luciano, Luca Regis () and Elena Vigna ()

ICER Working Papers from ICER - International Centre for Economic Research

Abstract: The paper provides natural hedging strategies among death benefits and annuities written on a single and on different generations. It obtains closed-form Delta and Gamma hedges, in the presence of both longevity and interest rate risk. We present an application to UK data on survivorship and bond dynamics. We first compare longevity and financial risk exposures: Deltas and Gammas for longevity risk are greater in absolute value than the corresponding sensitivities for interest rate risk. We then calculate the optimal hedges, both within and across generations. Our results apply to both asset and asset-liability management.

Pages: 27 pages
Date: 2012-05
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Citations: View citations in EconPapers (12)

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http://www.biblioecon.unito.it/biblioservizi/RePEc/icr/wp2012/ICERwp04-12.pdf (application/pdf)

Related works:
Journal Article: Single- and Cross-Generation Natural Hedging of Longevity and Financial Risk (2017)
Working Paper: Single and cross-generation natural hedging of longevity and financial risk (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:icr:wpicer:04-2012

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