Mathematical Models for Longevity Risk Management

Helena Aro

Research output: ThesisDoctoral ThesisCollection of Articles

Abstract

This thesis presents mathematical models for longevity risk management. An overall objective is to develop methods for hedging the cash flows of longevity-linked liabilities on financial markets. This is obtained by modelling the law of a multivariate stochastic process describing mortality and asset returns, with particular emphasis on the long-term development of mortality and its connections with asset returns. The resulting stochastic model is then applied to study the roles of systematic and non-systematic risks in pension portfolios and, ultimately, to investigate optimal investment from the viewpoint of an investor with longevity-linked liabilities. We show how the hedge of a longevity-linked cash flow can be improved by taking the liabilities into account in investment decisions.
Translated title of the contributionMatemaattisia malleja pitkäikäisyysriskin hallintaan
Original languageEnglish
QualificationDoctor's degree
Awarding Institution
  • Aalto University
Supervisors/Advisors
  • Nevanlinna, Olavi, Supervisor
  • Valkeila, Esko, Supervisor
  • Pennanen, Teemu, Advisor, External person
Publisher
Print ISBNs978-952-60-5269-4
Electronic ISBNs978-952-60-5270-0
Publication statusPublished - 2013
MoE publication typeG5 Doctoral dissertation (article)

Keywords

  • longevity risk
  • stochastic modelling
  • stochastic optimization
  • systematic mortality risk
  • non-systematic mortality risk
  • market risk
  • hedging

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