TY  - INPR
A1  - De Rosa, Clemente
A1  - Luciano, Elisa
A1  - Regis, Luca
KW  - Keywords: longevity risk
KW  -  basis risk
KW  -  static vs. dynamic hedging
KW  -  longevity swaps
KW  -  longevity bonds

JEL Classification: G22
KW  -  G32
JF  - Scandinavian Actuarial Journal
ID  - eprints2978
UR  - http://eprints.imtlucca.it/2978/
TI  - Basis Risk in Static versus Dynamic Longevity Risk Hedging
Y1  - 2016///
N2  - 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.
AV  - none
ER  -