Pricing longevity risk with the parametric bootstrap: A maximum entropy approach

被引:31
作者
Li, Johnny Siu-Hang [1 ]
机构
[1] Univ Waterloo, Dept Stat & Actuarial Sci, Waterloo, ON N2L 3G1, Canada
关键词
Canonical valuation; Cohort effects; Mortality-linked securities; The Cairns-Blake-Dowd model; The Lee-Carter model; LEE-CARTER MODEL; MORTALITY RISKS; SECURITIZATION; VALUATION; UNCERTAINTY; EXTENSION;
D O I
10.1016/j.insmatheco.2010.05.004
中图分类号
F [经济];
学科分类号
02 ;
摘要
In recent years, there has been significant development in the securitization of longevity risk. Various methods for pricing longevity risk have been proposed. In this paper we present an alternative pricing method, which is based on the maximization of the Shannon entropy in physics. Specifically, we propose implementing this pricing method with the parametric bootstrap (Brouhns et al., 2005), which is highly flexible and can be performed under different model assumptions. Through this pricing method we also quantify the impact of cohort effects and parameter uncertainty on prices of mortality-linked securities. Numerical illustrations based on longevity bonds with different maturities are provided. (C) 2010 Elsevier B.V. All rights reserved.
引用
收藏
页码:176 / 186
页数:11
相关论文
共 44 条
  • [1] Bell WR., 1997, J OFF STAT, V13, P279
  • [2] Biffis E., 2006, GIORNALE I ITALIANO, V69, P33
  • [3] Applying Lee-Carter under conditions of variable mortality decline
    Booth, H
    Maindonald, J
    Smith, L
    [J]. POPULATION STUDIES-A JOURNAL OF DEMOGRAPHY, 2002, 56 (03): : 325 - 336
  • [4] BROCKETT PL, 1991, T SOC ACTUARIES, V42, P73
  • [5] A Poisson log-bilinear regression approach to the construction of projected lifetables
    Brouhns, N
    Denuit, M
    Vermunt, JK
    [J]. INSURANCE MATHEMATICS & ECONOMICS, 2002, 31 (03) : 373 - 393
  • [6] BROUHNS N, 2005, SCANDINAVIAN ACTUARI, V31, P212
  • [7] A QUANTITATIVE COMPARISON OF STOCHASTIC MORTALITY MODELS USING DATA FROM ENGLAND AND WALES AND THE UNITED STATES
    Cairns, Andrew
    Blake, David
    Dowd, Kevin
    Coughlan, Guy
    Epstein, David
    Ong, Alen
    Balevich, Igor
    [J]. NORTH AMERICAN ACTUARIAL JOURNAL, 2009, 13 (01) : 1 - 35
  • [8] A two-factor model for stochastic mortality with parameter uncertainty: Theory and calibration
    Cairns, Andrew J. G.
    Blake, David
    Dowd, Kevin
    [J]. JOURNAL OF RISK AND INSURANCE, 2006, 73 (04) : 687 - 718
  • [9] Modeling Mortality With Jumps: Applications to Mortality Securitization
    Chen, Hua
    Cox, Samuel H.
    [J]. JOURNAL OF RISK AND INSURANCE, 2009, 76 (03) : 727 - 751
  • [10] CONTINUOUS MORTALITY INVESTIGATION BUREAU, 2002, 1 CMI I ACT FAC ACT