TY - JOUR
T1 - A Bayesian approach to pricing longevity risk based on risk-neutral predictive distributions
AU - Kogure, Atsuyuki
AU - Kurachi, Yoshiyuki
N1 - Funding Information:
The present research was supported by KAKENHI through a Grant-in-Aid (No. 19530285).
PY - 2010/2
Y1 - 2010/2
N2 - We present a Bayesian approach to pricing longevity risk under the framework of the Lee-Carter methodology. Specifically, we propose a Bayesian method for pricing the survivor bond and the related survivor swap designed by Denuit et al. (2007). Our method is based on the risk neutralization of the predictive distribution of future survival rates using the entropy maximization principle discussed by Stutzer (1996). The method is illustrated by applying it to Japanese mortality rates.
AB - We present a Bayesian approach to pricing longevity risk under the framework of the Lee-Carter methodology. Specifically, we propose a Bayesian method for pricing the survivor bond and the related survivor swap designed by Denuit et al. (2007). Our method is based on the risk neutralization of the predictive distribution of future survival rates using the entropy maximization principle discussed by Stutzer (1996). The method is illustrated by applying it to Japanese mortality rates.
KW - Bayesian approach
KW - Japanese mortality rates
KW - Maximum entropy principle
KW - Pricing longevity risk
KW - Risk-neutral predictive distribution
UR - http://www.scopus.com/inward/record.url?scp=74249094228&partnerID=8YFLogxK
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U2 - 10.1016/j.insmatheco.2009.10.005
DO - 10.1016/j.insmatheco.2009.10.005
M3 - Article
AN - SCOPUS:74249094228
VL - 46
SP - 162
EP - 172
JO - Insurance: Mathematics and Economics
JF - Insurance: Mathematics and Economics
SN - 0167-6687
IS - 1
ER -