Mortality-dependent financial risk measures

Kevin Dowd, A. J G Cairns, David Blake

Research output: Contribution to journalArticle

26 Citations (Scopus)

Abstract

This paper uses a recently developed two-factor stochastic mortality model to estimate financial risk measures for four illustrative types of mortality-dependent financial position: investments in zero-coupon longevity bonds; investments in longevity bonds that pay annual survivor-dependent coupons; and two examples of an insurer's annuity book that are each hedged by a longevity bond, one based on the annuity book and hedge having the same reference cohort, and the other not. The risk measures estimated are the value-at-risk, the expected shortfall and a spectral risk measure based on an exponential risk-aversion function. Results are reported on a model calibrated on data provided by the UK Government Actuary's Department, both with and without underlying parameter uncertainty. © 2005 Elsevier B.V. All rights reserved.

Original languageEnglish
Pages (from-to)427-440
Number of pages14
JournalInsurance: Mathematics and Economics
Volume38
Issue number3
DOIs
Publication statusPublished - 15 Jun 2006

Keywords

  • Coherent risk measures
  • Longevity bonds
  • Mortality risk
  • Spectral risk measures
  • Value-at-risk

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