NATURAL HEDGES WITH IMMUNIZATION STRATEGIES OF MORTALITY AND INTEREST RATES. Issue 1 (3rd January 2020)
- Record Type:
- Journal Article
- Title:
- NATURAL HEDGES WITH IMMUNIZATION STRATEGIES OF MORTALITY AND INTEREST RATES. Issue 1 (3rd January 2020)
- Main Title:
- NATURAL HEDGES WITH IMMUNIZATION STRATEGIES OF MORTALITY AND INTEREST RATES
- Authors:
- Lin, Tzuling
Tsai, Cary Chi-liang - Abstract:
- Abstract: In this paper, we first derive closed-form formulas for mortality-interest durations and convexities of the prices of life insurance and annuity products with respect to an instantaneously proportional change and an instantaneously parallel movement, respectively, in μ * (the force of mortality-interest), the addition of μ (the force of mortality) and δ (the force of interest). We then build several mortality-interest duration and convexity matching strategies to determine the weights of whole life insurance and deferred whole life annuity products in a portfolio and evaluate the value at risk and the hedge effectiveness of the weighted portfolio surplus at time zero. Numerical illustrations show that using the mortality-interest duration and convexity matching strategies with respect to an instantaneously proportional change in μ * can more effectively hedge the longevity risk and interest rate risk embedded in the deferred whole life annuity products than using the mortality-only duration and convexity matching strategies with respect to an instantaneously proportional shift or an instantaneously constant movement in μ only.
- Is Part Of:
- ASTIN bulletin. Volume 50:Issue 1(2020)
- Journal:
- ASTIN bulletin
- Issue:
- Volume 50:Issue 1(2020)
- Issue Display:
- Volume 50, Issue 1 (2020)
- Year:
- 2020
- Volume:
- 50
- Issue:
- 1
- Issue Sort Value:
- 2020-0050-0001-0000
- Page Start:
- 155
- Page End:
- 185
- Publication Date:
- 2020-01-03
- Subjects:
- Interest rate risk, -- longevity risk, -- duration, -- convexity, -- natural hedge
Insurance -- Mathematics -- Periodicals
Risk (Insurance) -- Mathematics -- Periodicals
368.01 - Journal URLs:
- http://journals.cambridge.org/action/displayBackIssues?jid=ASB ↗
http://poj.peeters-leuven.be/content.php?url=journal&journal_code=AST ↗
http://www.casact.org/library/astin/ ↗ - DOI:
- 10.1017/asb.2019.38 ↗
- Languages:
- English
- ISSNs:
- 0515-0361
- Deposit Type:
- Legaldeposit
- View Content:
- Available online (eLD content is only available in our Reading Rooms) ↗
- Physical Locations:
- British Library HMNTS - ELD Digital store
- Ingest File:
- 12671.xml