For many years, the longevity risk of individuals has been underestimated, as survival probabilities have improved across the developed world. The uncertainty and volatility of future longevity has posed significant risk issues for both individuals and product providers of annuities and...

This paper proposes and calibrates a consistent multi-factor affine term structure mortality model for longevity risk applications. We show that this model is appropriate for fitting historical mortality rates. Without traded mortality instruments the choice of risk-neutral measure is not unique...

Standard annuities are offered at one price to all individuals of the same age and gender. Individual mortality heterogeneity exposes insurers to adverse selection since only relatively healthy lives are expected to purchase annuities. As a result standard annuities are priced assuming...

This paper considers the pricing of European call options written on pure endowment and deferred life annuity contracts, also known as guaranteed annuity options. These contracts provide a guaranteed value at the maturity of the option. The contract valuation is dependent on the stochastic...

Systematic improvements in mortality increases dependence in the survival distributions of insured lives, which is not accounted for in standard life tables and actuarial models used for annuity pricing and reserving. Systematic longevity risk also undermines the law of large numbers, a law that...

This paper analyzes an individual’s post-retirement longevity risk management strategy allowing for systematic longevity risk, recent product innovations, and product loadings. A complete-markets discrete state model and multi-period simulations of portfolio strategies are used to assess...