Longevity bonds: Financial engineering, valuation, and hedging

David Blake, Andrew Cairns, Kevin Dowd, Richard MacMinn

Research output: Contribution to journalArticlepeer-review

90 Citations (Scopus)

Abstract

This article examines the main characteristics of longevity bonds (LBs) and shows that they can take a large variety of forms which can vary enormously in their sensitivities to longevity shocks. We examine different ways of financially engineering LBs and consider problems arising from the dearth of ultra-long government bonds and the choice of the reference population index. The article also looks at valuation issues in an incomplete markets context and finishes with an examination of how LBs can be used as a risk management tool for hedging longevity risks. © The Journal of Risk and Insurance, 2006.

Original languageEnglish
Pages (from-to)647-672
Number of pages26
JournalJournal of Risk and Insurance
Volume73
Issue number4
DOIs
Publication statusPublished - Dec 2006

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