Survivor Derivatives: A Consistent Pricing Framework

Survivor Derivatives: A Consistent Pricing Framework

Survivorship risk is a significant factor in the provision of retirement income. Survivor derivatives are in their early stages and offer potentially significant welfare benefits to society. This article applies the approach developed by Dowd et al. (2006), Olivier and Jeffery (2004), Smith (2005), and Cairns (2007) to derive a consistent framework for pricing a wide range of linear survivor de...

A Unified Framework for Pricing Credit and Equity Derivatives

We propose a model which can be jointly calibrated to the corporate bond term structure and equity option volatility surface of the same company. Our purpose is to obtain explicit bond and equity option pricing formulas that can be calibrated to find a risk neutral model that matches a set of observed market prices. This risk neutral model can then be used to price more exotic, illiquid or over...

Pricing Practices for Joint Last Survivor Insurance

In pricing joint last survivor insurance policies, standard industry practice assumes independence of mortality rates among the insured and adds on loading factors to compensate for possible under-estimations of the joint last survivor mortality due to common life style, broken heart factor or common disaster. Considering the fact that the separate mortality experiences for males and females ar...

Pricing Basic Risk in Survivor Swaps

Pricing Basis Risk in Survivor Swaps