Population-wide increase in life expectancy is a source of aggregate risk. Longevity-linked securities are a natural instrument to reallocate it. This paper extends the standard Campbell and Viceira (2005) strategic asset allocation model by including a longevity-linked investment possibility. Model estimation, based on prices for standardized annuities publicly offered by United States insurance companies, shows that aggregate shocks to survival probabilities are predictors for long-term returns of the longevity-linked securities, and reveals an unexpected predictability pattern. Valuation of longevity risk premium confirms that longevity-linked securities offer inexpensive funding opportunities to asset managers.
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http://hdl.handle.net/11565/3984436
Titolo: | A multivariate model of strategic asset allocation with longevity risk |
Data di pubblicazione: | 2017 |
Autori: | |
Autori: | Bisetti, Emilio; Favero, Carlo A.; Nocera, Giacomo; Tebaldi, Claudio |
Rivista: | JOURNAL OF FINANCIAL AND QUANTITATIVE ANALYSIS |
Abstract: | Population-wide increase in life expectancy is a source of aggregate risk. Longevity-linked securities are a natural instrument to reallocate it. This paper extends the standard Campbell and Viceira (2005) strategic asset allocation model by including a longevity-linked investment possibility. Model estimation, based on prices for standardized annuities publicly offered by United States insurance companies, shows that aggregate shocks to survival probabilities are predictors for long-term returns of the longevity-linked securities, and reveals an unexpected predictability pattern. Valuation of longevity risk premium confirms that longevity-linked securities offer inexpensive funding opportunities to asset managers. |
Appare nelle tipologie: | 01 - Articolo su rivista Scientifica |
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