Luciano, Elisa and Regis, Luca and Vigna, Elena Natural Delta Gamma Hedging of Longevity and Interest Rate Risk. ICER Working Paper. Working Paper #21/2011Full text not available from this repository.
The paper presents closed-form Delta and Gamma hedges for annuities and death assurances, in the presence of both longevity and interest-rate risk. Longevity risk is modeled through an extension of the classical Gompertz law, while interest rate risk is modeled via an Hull-and-White process. We theoretically provide natural hedging strategies, considering also contracts written on different generations. We provide a UK-population and bond-market calibrated example. We compute longevity exposures and explicitly calculate Delta-Gamma hedges. Re-insurance is needed in order to set-up portfolios which are Delta-Gamma neutral to both longevity and interest-rate risk.
|Item Type:||Working Paper (Working Paper)|
|Subjects:||H Social Sciences > HB Economic Theory|
|Research Area:||Economics and Institutional Change|
|Depositing User:||Ms T. Iannizzi|
|Date Deposited:||27 Sep 2013 11:46|
|Last Modified:||27 Sep 2013 11:46|
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