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Mortality risk modeling: applications to insurance securitization. (English) Zbl 1231.91168

Summary: We propose a stochastic mortality model featuring both permanent longevity jump and temporary mortality jump processes. A trend reduction component describes unexpected mortality improvement over an extended period of time. The model also captures the uneven effect of mortality events on different ages and the correlations among them. The model will be useful in analyzing future mortality dependent cash flows of life insurance portfolios, annuity portfolios, and portfolios of mortality derivatives. We show how to apply the model to analyze and price a longevity security.

MSC:

91B30 Risk theory, insurance (MSC2010)
91B70 Stochastic models in economics
91G10 Portfolio theory

Software:

LifeMetrics
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