Section: ArticlesTitle: Pricing longevity-linked securities in the presence of mortality trend changes / Arne FreimannAuthor: Freimann, ArneNotes: Sumario: Even though the trend in mortality improvements has experienced several permanent changes in the past, the uncertainty regarding future mortality trends is often left unmodeled when pricing longevity-linked securities. In this paper, we present a stochastic modeling framework for the valuation of longevity-linked securities which explicitly considers the risk of random future changes in the long-term mortality trend. We construct a set of meaningful probability distortions which imply equivalent risk-adjusted pricing measures under which the basic model structure is preserved. Inspired by risk-based capital requirements for (re)insurers, we also establish a cost-of-capital pricing approach which then serves as the appropriate reference framework for finding a reasonable range for the market price of longevity risk. In a numerical application, we demonstrate that our model produces plausible risk loadings and show that a greater proportion of the risk loading is allocated to longer maturities when the risk of random future mortality trend changes is adequately modeled.Related records: En: Astin bulletin. - Belgium : ASTIN and AFIR Sections of the International Actuarial Association = ISSN 0515-0361. - 10/05/2021 Volumen 51 Número 2 - mayo 2021 , p. 411-447Materia / lugar / evento: LongevidadMortalidadProductos de segurosSeguros vinculados a valoresTarificaciónMatemática del seguroOther categories: 6Rights: La copia digital se distribuye bajo licencia "Attribution 4.0 International (CC BY 4.0)" See issue detail
