Securitization of Longevity Risks Using Percentile Tranche Methods
26 Pages Posted: 26 Feb 2009
Date Written: February 25, 2009
Abstract
As a solution to the longevity risks in annuity business we consider securitizations which transfer the risks to the financial markets. We apply the classical Lee-Carter model to generate the future stochastic survival distribution. We show a method to design the survivor bonds using the percentile tranches and calculate the prices of the securities.
Keywords: Securitization, Risk Transfer, Survivor Bonds, Longevity Risks, Percentile Tranches.
JEL Classification: G22
Suggested Citation: Suggested Citation
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