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Mortality options: the point of view of an insurer. (English) Zbl 1460.91238

The authors consider a life insurer in a discrete time framework who is able to buy a securitization product to hedge mortality. Two cohorts are considered: one underlying the securitization product and one for the portfolio of the insurer. In a general setting, the authors show that there exists a unique strategy that maximizes the insurer’s expected utility from terminal wealth.
Numerical illustrations of the approach are demonstrated in the context of a Gompertz-Makeham model, where the realized survival probabilities can fluctuate moderately within an \(\epsilon\)-corridor, as well as in the context of a toy model for mortality shocks. In both examples the insurer can hedge longevity risk by trading in a survival bond.

MSC:

91G05 Actuarial mathematics
93E20 Optimal stochastic control
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References:

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