Redistribution of longevity risk: The effect of heterogeneous mortality beliefs

Existing literature regarding the natural hedge potential that arises from combining different longevity-linked liabilities typically does not address the question how changes in the liability mix can be obtained. We consider firms who aim to exploit the benefits of natural hedge potential by redistributing their risks, and characterize the risk redistributions that will arise when the parties bargain for a redistribution of risk that weakly benefits them all. We analyze the effects of heterogeneity in the beliefs regarding the probability distribution of future mortality rates on the properties of these risk redistributions, and provide a numerical illustration for a case where an insurer with a portfolio of term assurance contracts and a pension fund with a portfolio of life annuities redistribute their risks.     

基于权重比的民航飞行员安全行为指标权重算法

确定飞行员安全行为指标的权重,对发现民航飞行员飞行安全风险的短板,提高民航飞行安全性具有重要意义.基于指标权重比,提出了一种飞行员安全行为指标权重算法.并以此算法分析了职业安全意识、飞行情景意识、特情应变能力以及机组资源管理能力等指标对飞行员安全行为的影响程度,研究可为飞行员安全行为风险管理提供依据,对安全飞行具有积极的指导意义.     

Mathematical Models for Studying Environment Pollution Risks

The problem of longterm ecological prediction by means of mathematical modeling with available factual data on climate dynamics is discussed. The technique of quantitative estimates of risk/vulnerability on the basis of forward and inverse modeling and methods of the sensitivity theory is described. Examples of the calculated risk domains for Lake Baikal are given.     

武汉地区地震效应影响研究

虽然武汉市地震影响及地震危险性的水平较低 ,强震也不是武汉市工程地质环境的主要问题 ,但在城市生命线工程和高层超高层建筑方面必须考虑单体抗震设防。而且 ,随着武汉市城市建设的不断发展 ,地震效应影响逐渐成为武汉市工程地质环境评价的一个重要因子。文章在分析了武汉地区地震动衰减规律 ,进行了地震危险性评价 ,深入研究了各土层动力参数性质的基础上 ,指出武汉地区地震地面破坏主要存在砂土液化和软土震陷两种型式及各自可能的空间分布.     

结构元件安全评估与监控的风险预测方法

提出了一种评估结构疲劳可靠性的方法－风险预测方法。该方法利用结构在服股过役过程中的信息,在考虑了工程结构承采载荷的各态历经性的基础上,结合了结构元件寿命机分布形式和Ｍｉｎｅｒ线性累积损伤理论,以风险值来评价并监控结构元件在不同时间失效的危险性,并用算例和试验结果进行对比分析。     

A step-by-step guide to building two-population stochastic mortality models

Two-population stochastic mortality models play a crucial role in the securitization of longevity risk. In particular, they allow us to quantify the population basis risk when longevity hedges are built from broad-based mortality indexes. In this paper, we propose and illustrate a systematic process for constructing a two-population mortality model for a pair of populations. The process encompasses four steps, namely (1) determining the conditions for biological reasonableness, (2) identifying an appropriate base model specification, (3) choosing a suitable time-series process and correlation structure for projecting period and/or cohort effects into the future, and (4) model evaluation.For each of the seven single-population models from Cairns et al. (2009), we propose two-population generalizations. We derive criteria required to avoid long-term divergence problems and the likelihood functions for estimating the models. We also explain how the parameter estimates are found, and how the models are systematically simplified to optimize the fit based on the Bayes Information Criterion. Throughout the paper, the results and methodology are illustrated using real data from two pairs of populations.     

Extended Gerber–Shiu functions in a risk model with interest

We consider a compound Poisson risk model with interest. The Gerber–Shiu discounted penalty function is modified with an additional penalty for reaching a level above the initial capital. We show that the problem can be split into two independent problems; an original Gerber–Shiu function and a first passage problem. We also consider the case of negative interest. Finally, we apply the results to a model considered by Embrechts and Schmidli (1994).     

Multi-population mortality models: A factor copula approach

Modeling mortality co-movements for multiple populations have significant implications for mortality/longevity risk management. A few two-population mortality models have been proposed to date. They are typically based on the assumption that the forecasted mortality experiences of two or more related populations converge in the long run. This assumption might be justified by the long-term mortality co-integration and thus be applicable to longevity risk modeling. However, it seems too strong to model the short-term mortality dependence. In this paper, we propose a two-stage procedure based on the time series analysis and a factor copula approach to model mortality dependence for multiple populations. In the first stage, we filter the mortality dynamics of each population using an ARMA–GARCH process with heavy-tailed innovations. In the second stage, we model the residual risk using a one-factor copula model that is widely applicable to high dimension data and very flexible in terms of model specification. We then illustrate how to use our mortality model and the maximum entropy approach for mortality risk pricing and hedging. Our model generates par spreads that are very close to the actual spreads of the Vita III mortality bond. We also propose a longevity trend bond and demonstrate how to use this bond to hedge residual longevity risk of an insurer with both annuity and life books of business.     

Optimal life cycle portfolio choice with variable annuities offering liquidity and investment downside protection

This paper assesses optimal life cycle consumption and portfolio allocations when households have access to Guaranteed Minimum Withdrawal Benefit (GMWB) variable annuities over their adult lifetimes. Our contribution is to evaluate demand for these products which provide access to equity investments with money-back guarantees, longevity risk hedging, and partially-refundable premiums, in a realistic world with uncertain labor and capital market income as well as mortality risk. Others have predicted that consumers will only purchase such annuities late in life, but we show that they will optimally purchase GMWBs prior to retirement, consistent with their recent rapid uptick in sales. Additionally, many individuals optimally adjust their portfolios and consumption streams along the way by taking cash withdrawals from the products. These products can substantially enhance consumption, by up to 10% for those who experience highly unfavorable experiences in the stock market.     

Evaluation and default time for companies with uncertain cash flows

In this study, we propose a modelling framework for evaluating companies financed by random liabilities, such as insurance companies or commercial banks. In this approach, earnings and costs are driven by double exponential jump–diffusion processes and bankruptcy is declared when the income falls below a default threshold, which is proportional to the charges. A change of numeraire, under the Esscher risk neutral measure, is used to reduce the dimension. A closed form expression for the value of equity is obtained in terms of the expected present value operators, with and without disinvestment delay. In both cases, we determine the default threshold that maximizes the shareholder’s equity. Subsequently, the probabilities of default are obtained by inverting the Laplace transform of the bankruptcy time. In numerical applications of the proposed model, we apply a procedure for calibration based on market and accounting data to explain the behaviour of shares for two real-world examples of insurance companies.