Luciano, Elisa and Regis, Luca and Vigna, Elena Single and cross-generation natural hedging of longevity and financial risk. Working Paper #257/2012 ISSN 2279-9362. (Submitted)
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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.
| Item Type: | Working Paper (Working Paper) |
|---|---|
| Subjects: | H Social Sciences > HD Industries. Land use. Labor > HD61 Risk Management H Social Sciences > HG Finance Q Science > QA Mathematics |
| Research Area: | Economics and Institutional Change |
| Depositing User: | Users 53 not found. |
| Date Deposited: | 22 Oct 2013 08:01 |
| Last Modified: | 22 Oct 2013 08:01 |
| URI: | http://eprints.imtlucca.it/id/eprint/1838 |
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- Single and cross-generation natural hedging of longevity and financial risk. (deposited 22 Oct 2013 08:01) [Currently Displayed]
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