Securitization of Longevity Risk: Pricing under Stochastic Mortality Model with Tranching Design
Date Issued
2007
Date
2007
Author(s)
Huang, Yi-Hsin
DOI
en-US
Abstract
We utilize the securitized tranche technique to design a security for transferring longevity risk to the capital market. Our structure follows the concept of synthetic CDO. The reinsurance contract, which is similar to a CDS (Credit Default Swap), is first set between the insurer and the SPV. Then, the longevity bond is constructed and divided into four tranches according to the portfolio loss rate distribution. The longevity risk is modeling under a non mean-reverting Feller process introduced in Luciano and Vigna (2005). We value the longevity risk and calculate the transformed distribution under Wang’s method to consider the market price of longevity risk. A securitization tranching example is illustrated and the mortality information is based on the US mortality data observed in Human mortality data base.
Subjects
長命風險
長命風險證券化
證券化分券
死力
動態死亡率模型
長命風險市場價格
Longevity risk
Longevity securitization
Tranches
Force of Mortality
Feller process
Wang’s transform
SDGs
Type
thesis