An Optimal Product Mix for Hedging Longevity Risk in Life Insurance Companies: The Immunization Theory Approach

NCUIR > School of Management at National Central University > Department of Finance > journal & Dissertation > Item 987654321/51677

Please use this identifier to cite or link to this item: http://ir.lib.ncu.edu.tw/handle/987654321/51677

Title:	An Optimal Product Mix for Hedging Longevity Risk in Life Insurance Companies: The Immunization Theory Approach
Authors:	Wang,JL;Huang,HC;Yang,SS;Tsai,JT
Contributors:	財務金融學系
Keywords:	STOCHASTIC MORTALITY;SURVIVOR BONDS;SECURITIZATION;VALUATION
Date:	2010
Issue Date:	2012-03-27 19:02:36 (UTC+8)
Publisher:	國立中央大學
Abstract:	P>This article investigates the natural hedging strategy to deal with longevity risks for life insurance companies. We propose an immunization model that incorporates a stochastic mortality dynamic to calculate the optimal life insurance-annuity product mix ratio to hedge against longevity risks. We model the dynamic of the changes in future mortality using the well-known Lee-Carter model and discuss the model risk issue by comparing the results between the Lee-Carter and Cairns-Blake-Dowd models. On the basis of the mortality experience and insurance products in the United States, we demonstrate that the proposed model can lead to an optimal product mix and effectively reduce longevity risks for life insurance companies.
Relation:	JOURNAL OF RISK AND INSURANCE
Appears in Collections:	[Department of Finance] journal & Dissertation

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