Longevity Modelling and Pricing under a Dependent Multi-Cohort Framework

Zeddouk, Fadoua;Devolder, Pierre
(2020) Risks — Vol. 8, n° 4, p. 121 (2020)

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Authors
  • Zeddouk, FadouaUCLouvain
    Author
  • Devolder, PierreUCLouvain
    Author
Abstract
We propose a multi-cohort model that is able to capture the mortality correlation between different cohorts. The model is based on the Hull and White process to which we incorporate inter-generational risk factors, by modifying its stochastic part. We provide a pricing framework for a new survival forward contract under the Cost of Capital, risk-neutral and Sharpe approaches, allowing to cover the global multi-cohort longevity risk. We give numerical illustrations for Belgian cohorts, and we compute the price of the longevity derivative under the proposed methods, for different correlation levels
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Zeddouk, F., & Devolder, P. (2020). Longevity Modelling and Pricing under a Dependent Multi-Cohort Framework. Risks, 8(4), 121. https://doi.org/10.3390/risks8040121 (Original work published 2020)