Securitization of Longevity Risks Using Percentile Tranche Methods

26 Pages Posted: 26 Feb 2009

See all articles by Changki Kim

Changki Kim

Korea University Business School (KUBS)

Yangho Choi

University of Connecticut - Department of Mathematics

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

Kim, Changki and Choi, Yangho, Securitization of Longevity Risks Using Percentile Tranche Methods (February 25, 2009). UNSW Australian School of Business Research Paper No. 2009ACTL02, Available at SSRN: https://ssrn.com/abstract=1349398 or http://dx.doi.org/10.2139/ssrn.1349398

Changki Kim (Contact Author)

Korea University Business School (KUBS) ( email )

145 Anam-ro
Seongbuk-Gu
Seoul, Seoul 02841
Korea, Republic of (South Korea)
82.2.3290.2628 (Phone)

HOME PAGE: http://biz.korea.ac.kr/professor/changki-kim

Yangho Choi

University of Connecticut - Department of Mathematics

Department of Mathematics
196 Auditorium Road
Storrs, CT 06269-3009
United States