Optimal Hedge Ratios For Turkish Mortality
Öz
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 risk that survivor rates
might be higher than anticipated is called the longevity risk.
In this paper, a pension plan whose aim is to hedge its longevity risk with longevity hedging instrument
such as vanilla swap has been considered. We find the optimal hedge ratio which is defined as the number of
units held of the hedging instrument. The optimal hedge ratio is calculated under minimum variance hedging
and exponential utility. For the hedge ratio we need the value of the swap. In order to price the swap, we
modelled Turkish mortality by using the Lee-Carter model and the Cairns-Blake-Dowd model. We find optimal
hedge ratios for female and male populations of Turkey for different mortality models and different
risk criteria. The analysis showed that the hedge ratios do not change significantly for different mortality
models. However, as we change the risk criteria we observe quite different optimal hedge ratios.
Anahtar Kelimeler
Kaynakça
- BLAKE, Dowd, CAIRNS, A.J.G., and DOWD, K. (2006) “Living with mortality: Longevity Bonds and Other
Ayrıntılar
Birincil Dil
Türkçe
Konular
-
Bölüm
Araştırma Makalesi
Yayımlanma Tarihi
1 Temmuz 2016
Gönderilme Tarihi
14 Haziran 2016
Kabul Tarihi
-
Yayımlandığı Sayı
Yıl 2016 Cilt: 8 Sayı: 15