Universität zu Köln

Schmeck, Maren Diane and Schmidli, Hanspeter (2021). Mortality options: The point of view of an insurer. Insur. Math. Econ., 96. S. 98 - 116. AMSTERDAM: ELSEVIER. ISSN 1873-5959

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Abstract

In a discrete time framework we consider a life insurer who is able to buy a securitization product to hedge mortality. Two cohorts are considered: one underlying the securitization product and one for the portfolio of the insurer. In a general setting, we show that there exists a unique strategy that maximizes the insurer's expected utility from terminal wealth. We then numerically illustrate our findings: in a Gompertz-Makeham model, where the realized survival probabilities can fluctuate moderately within an e-corridor, as well as in a toy model for mortality shocks. In both examples the insurer can hedge longevity risk by trading in a survival bond. (C) 2020 Elsevier B.V. All rights reserved.

Item Type:	Journal Article
Creators:	Creators Email ORCID ORCID Put Code Schmeck, Maren Diane UNSPECIFIED UNSPECIFIED UNSPECIFIED Schmidli, Hanspeter UNSPECIFIED UNSPECIFIED UNSPECIFIED
URN:	urn:nbn:de:hbz:38-571351
DOI:	10.1016/j.insmatheco.2020.10.009
Journal or Publication Title:	Insur. Math. Econ.
Volume:	96
Page Range:	S. 98 - 116
Date:	2021
Publisher:	ELSEVIER
Place of Publication:	AMSTERDAM
ISSN:	1873-5959
Language:	English
Faculty:	Unspecified
Divisions:	Unspecified
Subjects:	no entry
Uncontrolled Keywords:	Keywords Language LONGEVITY BONDS; BASIS RISK; ACCUMULATION; VALUATION Multiple languages Economics; Mathematics, Interdisciplinary Applications; Social Sciences, Mathematical Methods; Statistics & Probability Multiple languages
URI:	http://kups.ub.uni-koeln.de/id/eprint/57135