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Financial intermediaries often provide guarantees that resemble out-of-the-money put options, exposing them to tail risk. Using the U.S. life insurance industry as a laboratory, we present a model in which variable annuity (VA) guarantees and associated hedging operate within the regulatory...
Persistent link: https://www.econbiz.de/10013248987
Financial intermediaries often provide guarantees that resemble out-of-the-money put options, exposing them to tail risk. We present a model in the context of the U.S. life insurance industry in which variable annuity (VA) guarantees and associated hedging operate within the regulatory capital...
Persistent link: https://www.econbiz.de/10012853169
Inflation for retirees is different from, and mostly higher than, the macroeconomic (average) inflation rate for the entire population. In the U.S. for example, the Consumer Price Index for the Urban population (CPI-U) calculated and reported by the Bureau of Labor Statistics (BLS) has a lesser...
Persistent link: https://www.econbiz.de/10013125606
Persistent link: https://www.econbiz.de/10014306947
Traditional life insurance policies offer no equity investment opportunities for the premium paid, and suffer from low returns over the long insurance terms. Modern equity-linked insurance policies offer equity investment opportunities exposed to equity market risk. To combine the low-risk of...
Persistent link: https://www.econbiz.de/10012891148
uncertainty is referred to as longevity risk. Existing literature shows that the effect of longevity risk on single life annuities … can be substantial, and that there exists a (natural) hedge potential from combining single life annuities with death …
Persistent link: https://www.econbiz.de/10013127855
product providers of annuities and pensions. This paper investigates the effectiveness of static hedging strategies for … models are developed for the underlying risks in annuities. The market model is a regime switching vector error correction … longevity risk substantially for life annuities, but significantly less for deferred annuities. For inflation indexed annuities …
Persistent link: https://www.econbiz.de/10013116210
A particularly important issue in retirement income provision is longevity risk. There are two components to longevity risk. The first is the uncertainty over how long any particular pension scheme member is going to live after retirement. This is known as idiosyncratic longevity risk. Both...
Persistent link: https://www.econbiz.de/10012829587
This paper provides a method to assess the risk relief deriving from a foreign expansion by a life-insurance company. We build a parsimonious continuous-time model for longevity risk, that captures the dependence across different ages in domestic versus foreign populations. We provide three...
Persistent link: https://www.econbiz.de/10012857938
This paper suggests a unified methodology for assessing the risk embedded in ratchet guarantees offered in life insurance Variable Annuity contracts. Using a non-Gaussian setting in line with most stylized features observed in the market, we address these questions from an operational risk...
Persistent link: https://www.econbiz.de/10013055148