Natural hedges with immunization strategies of mortality and interest rates

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<title>Natural hedges with immunization strategies of mortality and interest rates</title>
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<name type="personal" usage="primary">
<namePart>Lin, Tzuling</namePart>
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<name type="personal">
<namePart>Chi-Liang Tsai, Cary</namePart>
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<abstract>In this paper, we first derive closed-form formulas for mortality-interest durations and convexities of the prices of life insurance and annuity products with respect to an instantaneously proportional change and an instantaneously parallel movement, respectively, in ?? (the force of mortality-interest), the addition of ? (the force of mortality) and ? (the force of interest). We then build several mortality-interest duration and convexity matching strategies to determine the weights of whole life insurance and deferred whole life annuity products in a portfolio and evaluate the value at risk and the hedge effectiveness of the weighted portfolio surplus at time zero. Numerical illustrations show that using the mortality-interest duration and convexity matching strategies with respect to an instantaneously proportional change in ?? can more effectively hedge the longevity risk and interest rate risk embedded in the deferred whole life annuity products than using the mortality-only duration and convexity matching strategies with respect to an instantaneously proportional shift or an instantaneously constant movement in ? only.</abstract>
<note type="statement of responsibility">Tzuling Lin, Cary Chi-Liang Tsai</note>
<subject>
<topic>Matemática del seguro</topic>
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<subject>
<topic>Tasas de interés</topic>
</subject>
<subject>
<topic>Cálculo actuarial</topic>
</subject>
<subject>
<topic>Modelos actuariales</topic>
</subject>
<subject>
<topic>Seguro de vida</topic>
</subject>
<classification authority="">6</classification>
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<titleInfo>
<title>Astin bulletin</title>
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<publisher>Belgium : ASTIN and AFIR Sections of the International Actuarial Association</publisher>
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<identifier type="issn">0515-0361</identifier>
<identifier type="local">MAP20077000420</identifier>
<part>
<text>01/01/2020 Volumen 50 Número 1 - enero 2020 , p. 155-185</text>
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