Longevity Bonds: una applicazione al mercato italiano


The paper focuses on the securitization of longevity risk through mortality-linked securities. Alternative mortality-linked securities have been proposed in literature (see Cairns-Blake-Dowd (2006)) and among these we considered the longevity bond as the most appropriate to hedge longevity risk. The paper aim at comparing two different approaches developed in the actuarial literature for the pricing of mortality linked securities: the one based on a distortion operator as the Wang transform and the other based on the arbitrage-free pricing framework used for financial derivatives. We underline drawbacks and advantages of each method, with reference to the Italian population. Each approach is applied to the case study adopting a Lee-Carter log-bilinear model to represent the evolution of mortality. Later on, we calculate the risk adjusted market price of a longevity bond with a constant fixed coupon.

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Keywords: Stochastic mortality; longevity risk; longevity bonds; annuity market

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