Mortality Risk Modeling: Applications to Insurance Securitization

This paper proposes 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.

Publication Information
Article Title: Mortality Risk Modeling: Applications to Insurance Securitization
Journal: Insurance: Mathematics and Economics (Jul, 2008)
Author(s): Cox, Samuel H.;  Lin, Yijia;  Pedersen, Hal
Researcher Information
Lin, Yijia
Lin, Yijia
N. Z. Snell Life Insurance Professor
CoB 425 V
P.O. Box 880490
University of Nebraska-Lincoln
Lincoln, NE 68588-0490, USA
Phone: (402) 472-0093
Fax: (402) 472-5140