On the robustness of longevity risk pricing

Chen, Bingzheng; Zhang, Lihong; Zhao, Lin

doi:10.1016/j.insmatheco.2010.08.002

Cited by 21 publications

(10 citation statements)

References 40 publications

(51 reference statements)

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“…2. For example, Denuit et al (2007), Bauer et al (2010), Chen and Cox (2009) and Chen et al (2010) used the Wang transform; Milevsky and Promislow (2001), Biffis (2005), Biffis and Millossovich (2006), Cairns et al (2006b) and Dahl and Moller (2006) used the arbitrage-free method; Milevsky et al (2005), Bayraktar and Young (2007) and Young (2008) used the Sharpe ratio method to price mortality risk.…”

Section: Conclusion and Discussionmentioning

confidence: 99%

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The Pricing of Mortality-Linked Contingent Claims: An Equilibrium Approach

Tsai

Tzeng

2013

ASTIN Bull.

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This study introduces an equilibrium approach to price mortality-linked securities in a discrete time economy, assuming that the mortality rate has a transformed normal distribution. This pricing method complements current studies on the valuation of mortality-linked securities, which only have discrete trading opportunities and insufficient market trading data. Like the Wang transform, the valuation relationship is still risk-neutral (preference-free) and the mortality-linked security is priced as the expected value of its terminal payoff, discounted by the risk-free rate. This study provides an example of pricing the Swiss Re mortality bond issued in 2003 and obtains an approximated closed-form solution.

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Section: Conclusion and Discussionmentioning

confidence: 99%

“…Bayraktar et al (2009) and Young (2008) use this method to price ML-CCs. Bauer et al (2010) and Chen et al (2010) compare and comment on the robustness of these approaches and provide guidance for choosing among these pricing methods.…”

Section: Introductionmentioning

confidence: 99%

The Pricing of Mortality-Linked Contingent Claims: An Equilibrium Approach

Tsai

Tzeng

2013

ASTIN Bull.

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“…The most popular mortality pricing methods can be divided into three categories: the Wang transform, the Sharpe ratio rule, and the risk‐neutral method (Chen, Zhang, and Zhao, ; Li and Ng, ). Chen, Zhang, and Zhao ().…”

Section: Modeling Approachmentioning

confidence: 99%

“…The most popular mortality pricing methods can be divided into three categories: the Wang transform, the Sharpe ratio rule, and the risk-neutral method (Chen, Zhang, and Zhao, 2010;Li and Ng, 2011). Chen, Zhang, and Zhao (2010) study the robustness of these three methods and conclude that for long maturities, compared to the other two methods, the Wang transform is the preferable one with respect to the perturbations of risk loadings and underlying parameters. As buy-in and buy-out annuities are long-term products, we use the Wang transform to price longevity risk throughout this article.…”

Section: Longevity Risk Modelmentioning

confidence: 99%

Pricing Buy‐Ins and Buy‐Outs

Lin¹,

Shi²,

Arık³

2016

J of Risk & Insurance

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Pension buy‐ins and buy‐outs have become an important aspect of managing pension risk in recent years. As a step toward understanding these pension de‐risking instruments, we develop models for pricing investment risk and longevity risk embedded in pension buy‐ins and buy‐outs. We also bring a contingent‐claims framework to price credit risk of buy‐in bulk annuities. Overall, our model can be used to assess the pricing of investment, longevity, and credit risks being transferred in pension buy‐in and buy‐out transactions.

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“…The economic interpretations of the Wang transform are closely related to the Esscher transform and both approaches are widely used in the insurance and finance literature. These approaches have been applied to pricing in a variety of areas including the securitization of longevity and mortality risks (Cox, Lin, and Wang, ; Denuit, Devolder, and Goderniaux, ; Chen, Zhang, and Zhao, ), annuity (Lin, Tan, and Yang, ), mortgage (Chen, Cox, and Wang, ), weather derivatives (Moridaira, ), and options and other derivatives in general (Gerber and Shiu, ; Gerber and Landry, ; Vyncke et al, ; Monfort and Pegoraro, ). Connections between the Esscher and the Wang transforms are discussed in detail by Labuschagne and Offwood ().…”

Section: Weather Risk Hedging and Its Contribution To The Corporate Vmentioning

confidence: 99%

Managing Weather Risks: The Case of J. League Soccer Teams in Japan

Ito

Ozawa

2015

J of Risk & Insurance

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Weather-related risks present significant concerns for businesses worldwide. This article studies the impact weather conditions have on the financial performance of sports teams and proposes a hedging mechanism to manage the exposure. We analyze a unique game attendance data set supplied by the Japanese premier soccer association, J. League. Our analysis shows that precipitation has a significantly adverse impact on game attendance and team profits. We then design a hedging mechanism for this risk exposure and examine its contribution to the corporate value of the teams. In particular, we use the Wang transform model to incorporate the decision makers' risk preferences in the evaluation of the weather derivatives, where the risk aversion parameters are obtained from a survey of J. League managers. We find that the proposed weather derivatives contribute significantly to team value. Our analysis and results provide insights for weather risk management for sports teams in the international markets.

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On the robustness of longevity risk pricing

Cited by 21 publications

References 40 publications

The Pricing of Mortality-Linked Contingent Claims: An Equilibrium Approach

The Pricing of Mortality-Linked Contingent Claims: An Equilibrium Approach

Pricing Buy‐Ins and Buy‐Outs

Managing Weather Risks: The Case of J. League Soccer Teams in Japan

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