Home|Journals|Articles by Year|Audio Abstracts

Original Article

Ekonomik Yaklasim. 2015; 26(95): 89-112

Pricing Longevity Risks with Survivor Swaps: An Application to Turkey

Selin Değirmenci, Şule Şahin.

Cited by 2 Articles

The increase in life expectancy of individuals poses a risk for insurance companies. If people live longer than anticipated, insurance companies make losses on their annuity books. The aim of this paper is hedging longevity risk, securitization of longevity risks with survivor swaps and price survivor swaps using Turkey Life Tables. In this paper, we examine the longevity risk and model Turkish mortality using the Lee-Carter and the Olivier-Smith model with beta and gamma distributions. In order to price the random payments under Q risk neutral pricing measure we use Wang transform. We calculate random payments of swap for different market prices of risk, different interest rates and different mortality models. The fixed payments of the swap is calculated by using the underlying mortality table. Then we compare the swap premiums which are the rates that equate the present values of fixed payments and random payments. As a result we find that swap premiums are not significantly affected by the market price of risk and interest rates. We conclude that the most important factor is the mortality model to get fair value of the swap.

Key words: Survivor swaps, Securitization of mortality, Lee-Carter model, Olivier-Smith model, Wang transform. JEL Classification: G13, G22.

Article Language: EnglishTurkish

Full-text options

Share this Article

Online Article Submission
• ejmanager.com

ejPort - eJManager.com
Refer & Earn
About BiblioMed
License Information
Terms & Conditions
Privacy Policy
Contact Us

The articles in Bibliomed are open access articles licensed under Creative Commons Attribution 4.0 International License (CC BY), which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons licence, and indicate if changes were made. To view a copy of this licence, visit http://creativecommons.org/licenses/by/4.0/.