Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/195803 
Year of Publication: 
2018
Citation: 
[Journal:] Risks [ISSN:] 2227-9091 [Volume:] 6 [Issue:] 1 [Publisher:] MDPI [Place:] Basel [Year:] 2018 [Pages:] 1-20
Publisher: 
MDPI, Basel
Abstract: 
The design and development of post-retirement income products require the assessment of longevity risk, as well as a basis for hedging these risks. Most indices for longevity risk are age-period based. We develop and assess a cohort-based value index for life insurers and pension funds to manage longevity risk. There are two innovations in the development of this index. Firstly, the underlying variables of most existing longevity indices are based on mortality experience only. The value index is based on the present value of future cash flow obligations, capturing all the risks in retirement income products. We use the index to manage both longevity risk and interest rate risk. Secondly, we capture historical dependencies between ages and cohorts with a cohort-based stochastic mortality model. We achieve this by introducing age-dependent model parameters. With our mortality model, we obtain realistic cohort correlation structures and improve the fitting performance, particularly for very old ages.
Subjects: 
retirement income risk
cohort mortality
value index
mortality risk
interest rate risk
hedge efficiency
JEL: 
C63
G22
G12
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article
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