relation: http://eprints.imtlucca.it/2978/
title: Basis Risk in Static versus Dynamic Longevity Risk Hedging
creator: De Rosa, Clemente
creator: Luciano, Elisa
creator: Regis, Luca
subject: HG Finance
subject: QA Mathematics
description: This paper provides a simple model for basis risk in a longevity framework, by separating common and idiosyncratic risk factors. Basis risk is captured by a single parameter, that measures the co-movement between the portfolio and the reference population. In this framework, the paper sets out the static, swap-based hedge for an annuity, and compares it with the dynamic, delta-based hedge, achieved using longevity bonds. We assume that the longevity intensity is distributed according to a CIR-type process and provide closed-form derivatives prices and hedges, also in the presence of an analogous CIR process for interest rate risk.
date: 2016
type: Article
type: PeerReviewed
identifier:   De Rosa, Clemente and Luciano, Elisa and Regis, Luca  Basis Risk in Static versus Dynamic Longevity Risk Hedging.  Scandinavian Actuarial Journal.      (In Press)   (2016)