scholarly journals Pricing Death: Frameworks for the Valuation and Securitization of Mortality Risk

2006 ◽  
Vol 36 (01) ◽  
pp. 79-120 ◽  
Author(s):  
Andrew J.G. Cairns ◽  
David Blake ◽  
Kevin Dowd
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Mortality Risk ◽  
Mortality Factors ◽  
Market Models ◽  
Force Of Mortality ◽  
Mortality Models ◽  
The Interest Rate ◽  
Risk Free Rate ◽  
Longevity Bonds

It is now widely accepted that stochastic mortality – the risk that aggregate mortality might differ from that anticipated – is an important risk factor in both life insurance and pensions. As such it affects how fair values, premium rates, and risk reserves are calculated.This paper makes use of the similarities between the force of mortality and interest rates to examine how we might model mortality risks and price mortality-related instruments using adaptations of the arbitrage-free pricing frameworks that have been developed for interest-rate derivatives. In so doing, the paper pulls together a range of arbitrage-free (or risk-neutral) frameworks for pricing and hedging mortality risk that allow for both interest and mortality factors to be stochastic. The different frameworks that we describe – short-rate models, forward-mortality models, positive-mortality models and mortality market models – are all based on positive-interest-rate modelling frameworks since the force of mortality can be treated in a similar way to the short-term risk-free rate of interest. While much of this paper is a review of the possible frameworks, the key new development is the introduction of mortality market models equivalent to the LIBOR and swap market models in the interest-rate literature.These frameworks can be applied to a great variety of mortality-related instruments, from vanilla longevity bonds to exotic mortality derivatives.

scholarly journals Pricing Death: Frameworks for the Valuation and Securitization of Mortality Risk

2006 ◽  
Vol 36 (1) ◽  
pp. 79-120 ◽  
Author(s):  
Andrew J.G. Cairns ◽  
David Blake ◽  
Kevin Dowd
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Mortality Risk ◽  
Mortality Factors ◽  
Market Models ◽  
Force Of Mortality ◽  
Mortality Models ◽  
The Interest Rate ◽  
Risk Free Rate ◽  
Longevity Bonds

It is now widely accepted that stochastic mortality – the risk that aggregate mortality might differ from that anticipated – is an important risk factor in both life insurance and pensions. As such it affects how fair values, premium rates, and risk reserves are calculated.This paper makes use of the similarities between the force of mortality and interest rates to examine how we might model mortality risks and price mortality-related instruments using adaptations of the arbitrage-free pricing frameworks that have been developed for interest-rate derivatives. In so doing, the paper pulls together a range of arbitrage-free (or risk-neutral) frameworks for pricing and hedging mortality risk that allow for both interest and mortality factors to be stochastic. The different frameworks that we describe – short-rate models, forward-mortality models, positive-mortality models and mortality market models – are all based on positive-interest-rate modelling frameworks since the force of mortality can be treated in a similar way to the short-term risk-free rate of interest. While much of this paper is a review of the possible frameworks, the key new development is the introduction of mortality market models equivalent to the LIBOR and swap market models in the interest-rate literature.These frameworks can be applied to a great variety of mortality-related instruments, from vanilla longevity bonds to exotic mortality derivatives.

A Bayesian Pricing of Longevity Derivatives with Interest Rate Risks

2017 ◽  
Vol 0 (0) ◽  
Author(s):  
Atsuyuki Kogure ◽  
Takahiro Fushimi
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Mortality Risk ◽  
Interest Rate Risk ◽  
Stochastic Interest Rates ◽  
Rate Risk ◽  
Stochastic Interest ◽  
The Interest Rate ◽  
Longevity Bonds ◽  
Carter Model

AbstractMortality-linked securities such as longevity bonds or longevity swaps usually depend on not only mortality risk but also interest rate risk. However, in the existing pricing methodologies, it is often the case that only the mortality risk is modeled to change in a stochastic manner and the interest rate is kept fixed at a pre-specified level. In order to develop large and liquid longevity markets, it is essential to incorporate the interest rate risk into pricing mortality-linked securities. In this paper we tackle the issue by considering the pricing of longevity derivatives under stochastic interest rates following the CIR model. As for the mortality modeling, we use a two-factor extension of the Lee-Carter model by noting the recent studies which point out the inconsistencies of the original Lee-Carter model with observed mortality rates due to its single factor structure. To address the issue of parameter uncertainty, we propose using a Bayesian methodology both to estimate the models and to price longevity derivatives in line with (Kogure, A., and Y. Kurachi. 2010. “A Bayesian Approach to Pricing Longevity Risk Based on Risk Neutral Predictive Distributions.”

DETERMINAN INFLASI DI INDONESIA PERIODE 1980-2015

2016 ◽  
Vol 21 (1) ◽  
pp. 1-7
Author(s):  
Risna Risna
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Money Supply ◽  
Government Spending ◽  
Positive Impact ◽  
Secondary Data ◽  
Quantitative Approach ◽  
State Spending ◽  
Factors Affecting ◽  
The Interest Rate

This study aims to determine the effect of government spending, the money supply, the interest rate of Bank Indonesia against inflation.This study uses secondary data. Secondary data were obtained directly from the Central Bureau of Statistics and Bank Indonesia. It can be said that there are factors affecting inflationas government spending, money supply, and interest rates BI. The reseach uses a quantitative approach to methods of e-views in the data. The results of analysis of three variables show that state spending significantand positive impact on inflationin Indonesia, the money supply significantand negative to inflationin Indonesia, BI rate a significantand positive impact on inflation in Indonesia

scholarly journals Risk Management for Bonds with Embedded Options

Mathematics ◽  
2020 ◽  
Vol 8 (5) ◽  
pp. 790
Author(s):  
Antonio Díaz ◽  
Marta Tolentino
Keyword(s):  
Risk Management ◽  
Interest Rate ◽  
Interest Rates ◽  
Interest Rate Risk ◽  
Interest Rate Models ◽  
Management Measures ◽  
Interest Rate Risk Management ◽  
Embedded Options ◽  
The Interest Rate ◽  
Interest Rate Change

This paper examines the behavior of the interest rate risk management measures for bonds with embedded options and studies factors it depends on. The contingent option exercise implies that both the pricing and the risk management of bonds requires modelling future interest rates. We use the Ho and Lee (HL) and Black, Derman, and Toy (BDT) consistent interest rate models. In addition, specific interest rate measures that consider the contingent cash-flow structure of these coupon-bearing bonds must be computed. In our empirical analysis, we obtained evidence that effective duration and effective convexity depend primarily on the level of the forward interest rate and volatility. In addition, the higher the interest rate change and the lower the volatility, the greater the differences in pricing of these bonds when using the HL or BDT models.

scholarly journals The Impact of Interest Rate Ceilings on Microfinance Industry

2015 ◽  
Vol 2 (2) ◽  
pp. 10
Author(s):  
Ali Saleh Alshebami ◽  
D. M. Khandare
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Low Income ◽  
Secondary Data ◽  
Research Subject ◽  
Access To Credit ◽  
The Poor ◽  
Good Intention ◽  
The Interest Rate ◽  
The Impact

<p>Imposing ceilings on the interest rate has recently become one of the new hottest topics in microfinance industry; various debates have been discussing this issue to know the effect of interest rate ceilings on the supply of credit in particular and on microfinance industry in general. However in spite of the good intention behind these ceilings, there was no absolute result stating that ceilings have really contributed to the improvement or protection of the poor clients, indeed, these ceilings have hurt those low income people instead of helping them, due to these ceilings most of MFIs left the market or reduced their scale due to the inability to continue operating with low interest rate leaving the very poor clients without access to credit. Thus, the purpose of this paper is to review the impact of imposing such ceilings on the interest rates and to find out what alterative solutions can be employed as substitutes for them. This paper is entirely based on the secondary data collected from various records related to microfinance such as microfinance books, official websites and reports, published papers, and other sources related to the research subject.</p>

scholarly journals Pengaruh Tingkat Suku Bunga, Inflasi Dan Nilai Kurs Terhadap Harga Saham Perusahaan Perhotelan Yang Terdaftar Di Bursa Efek Indonesia Per Triwulannya Periode 2016-2018

2021 ◽  
Vol 4 (2) ◽  
pp. 871-877
Author(s):  
Rahmat Dewa Bagas Nugraha ◽  
H.M Nursito
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Exchange Rates ◽  
Interest Rates ◽  
Quantitative Study ◽  
Stock Prices ◽  
Stock Exchange ◽  
Secondary Data ◽  
Ratio Analysis ◽  
The Interest Rate

This study aims to determine and analyze the factors that affect stock prices through appropriate ratio analysis. As for the ratio of interest rates, inflation and exchange rates. Researchers want to know and analyze the effect partially or simultaneously between interest rates, inflation, and exchange rates on stock prices. This research is a quantitative study using secondary data. The object of this research is hotel companies listed on the Indonesia Stock Exchange for the period 2016-2018. The sample used in this study were 3 hotel with certain characteristics. The results of research simultaneously using the F test show that there is no influence between interest rates, inflation and exchange rates on stock prices because the calculated value is smaller than the table. Partially with the t test it can be concluded that there is no influence between interest rates on stock prices because the tcount value in the interest rate variable is smaller than the t table. Likewise, the t calculation of inflation and the exchange rate is smaller than the t table, so that there is no partial effect of the two variables on stock prices. Keywords: Stock Prices, Interest Rates, Inflation and Exchange Rates

scholarly journals Does the Interest Rate Form Business Cycle?

2019 ◽  
Vol 4 (1) ◽  
pp. 29-34
Author(s):  
Bijan Bidabad ◽  
Abul Hassan
Keyword(s):  
Interest Rate ◽  
Business Cycle ◽  
Interest Rates ◽  
Banking System ◽  
Real Economy ◽  
Short Term ◽  
The Usa ◽  
Rate Form ◽  
The Interest Rate

Dynamic structural behavior of depositor, bank and borrower and the role of banks in forming business cycle are investigated. We test the hypothesis that does banks behavior make oscillations in the economy through the interest rate. By dichotomizing banking activities into two markets of deposit and loan, we show that these two markets have non-synchronized structures, and this is why the money sector fluctuation starts. As a result, the fluctuation is transmitted to the real economy through saving and investment functions. Empirical results assert that in the USA, the banking system creates fluctuations in the money sector and real economy as well through short-term interest rates

INTEREST RATE TARGETS AND SPECULATIVE ATTACKS ON PUBLIC DEBT

2018 ◽  
Vol 23 (07) ◽  
pp. 2698-2716 ◽  
Author(s):  
Pompeo Della Posta
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Euro Area ◽  
Public Debt ◽  
Nonlinear Behavior ◽  
Lender Of Last Resort ◽  
Speculative Attacks ◽  
The Interest Rate ◽  
Exchange Rate Target Zones ◽  
Primary Surplus

The application of exchange rate target zones modeling to interest rates allows interpreting the puzzles that emerged with the public debt euro area crisis, namely the nonlinear behavior of the interest rates and the fact that some stand-alone countries, not belonging to the euro area, have not been subject to speculative attacks in spite of equally large public debt-to-gross domestic product (GDP) ratios. As a matter of fact, this model shows that in the case of a noncredible upper threshold for the interest rate (that may be due to both the lack of room for increasing further the required government primary surplus and/or the absence of a monetary authority acting as a lender of last resort), the resulting public debt unsustainability determines an interest rate nonlinearity and makes the crisis possible for public debt levels that would be stable in the presence of a credible interest rate target.

scholarly journals Safe Assets, Liquidity, and Monetary Policy

2017 ◽  
Vol 9 (2) ◽  
pp. 182-227 ◽  
Author(s):  
Pierpaolo Benigno ◽  
Salvatore Nisticò
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Interest Rates ◽  
Risk Sharing ◽  
Balance Sheet ◽  
Multiple Assets ◽  
Interest Rate Spreads ◽  
The Interest Rate ◽  
Liquidity Shock ◽  
Deep Recession

This paper studies monetary policy in models where multiple assets have different liquidity properties: safe and “pseudo-safe” assets coexist. A shock worsening the liquidity properties of the pseudo-safe assets raises interest rate spreads and can cause a deep recession-cum-deflation. Expanding the central bank’s balance sheet fills the shortage of safe assets and counteracts the recession. Lowering the interest rate on reserves insulates market interest rates from the liquidity shock and improves risk sharing between borrowers and savers. (JEL E31, E32, E43, E44, E52)

Does the slope of the yield curve of the interbank market influence prices on the Warsaw Stock Exchange? A sectoral perspective

2021 ◽  
Vol 67 (4) ◽  
pp. 294-307
Author(s):  
Ewa Majerowska ◽  
Jacek Bednarz
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Term Structure ◽  
Yield Curve ◽  
Stock Exchange ◽  
Rate Curve ◽  
Daily Data ◽  
Warsaw Stock Exchange ◽  
The Interest Rate ◽  
Relationship Of

The interest rate curve is often viewed as the leading indicator of economic prosperity in a broad sense. This paper studies the ability of the slope of the yield curve in the term structure of interest rates to impact the sectoral indices on the Warsaw Stock Exchange, using daily data covering the period from 1 January 2001 to 30 September 2020. The results of the research indicate an ambiguous dependence of the logarithmic rates of return of sub-indices on the change of the interbank interest rate curve. The only sectors showing a clear relationship of this type is energy and pharmaceuticals.

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