De Rosa, Clemente and Luciano, Elisa and Regis, Luca Basis Risk in Static versus Dynamic Longevity Risk Hedging. Scandinavian Actuarial Journal. (In Press) (2016)
Full text not available from this repository.Abstract
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.
| Item Type: | Article |
|---|---|
| Funders: | Global Risk Institute, Canada |
| Uncontrolled Keywords: | Keywords: longevity risk, basis risk, static vs. dynamic hedging, longevity swaps, longevity bonds JEL Classification: G22, G32 |
| Subjects: | H Social Sciences > HG Finance Q Science > QA Mathematics |
| Research Area: | Economics and Institutional Change |
| Depositing User: | Users 53 not found. |
| Date Deposited: | 11 Jan 2016 09:11 |
| Last Modified: | 26 Feb 2016 15:56 |
| URI: | http://eprints.imtlucca.it/id/eprint/2978 |
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