Título: Natural hedges with immunization strategies of mortality and interest rates / Tzuling Lin, Cary Chi-Liang Tsai
Autor: Lin, Tzuling
Notas: Sumario: In this paper, we first derive closed-form formulas for mortality-interest durations and convexities of the prices of life insurance and annuity products with respect to an instantaneously proportional change and an instantaneously parallel movement, respectively, in ?? (the force of mortality-interest), the addition of ? (the force of mortality) and ? (the force of interest). We then build several mortality-interest duration and convexity matching strategies to determine the weights of whole life insurance and deferred whole life annuity products in a portfolio and evaluate the value at risk and the hedge effectiveness of the weighted portfolio surplus at time zero. Numerical illustrations show that using the mortality-interest duration and convexity matching strategies with respect to an instantaneously proportional change in ?? can more effectively hedge the longevity risk and interest rate risk embedded in the deferred whole life annuity products than using the mortality-only duration and convexity matching strategies with respect to an instantaneously proportional shift or an instantaneously constant movement in ? only.
Autores secundários: Chi-Liang Tsai, Cary
Outras classificações: 6