Longevity risk hedging with a population-based index solution
Population-based index products can be designed to hedge excess longevity exposure. Cedric Fetiveau and Chenye Jia of Deutsche Bank propose a method to measure these risks through defining a duo-population Lee-Carter model
As longevity risk increased in importance, various de-risking solutions emerged in the capital markets. Buy-outs, longevity swaps and tailored indexes are examples of bespoke solutions that match the risk profile of the underlying pension scheme well. However, the lack of standardisation leads to complexity in execution, difficulty in unwinding and limited distribution capacity.
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