TY  - INPR
ID  - eprints2726
EP  - 26
Y1  - 2015/06//
AV  - public
TI  - Single and cross-generation natural hedging of longevity and financial risk
JF  - Journal of Risk and Insurance
UR  - http://eprints.imtlucca.it/2726/
SN  - 1539-6975
PB  - American Risk and Insurance Association
A1  - Luciano, Elisa
A1  - Regis, Luca
A1  - Vigna, Elena
N2  - 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.
ER  -