Securitization of Catastrophe Mortality Risks

Authors

• Yijia Lin, University of Nebraska-LincolnFollow
• Samuel H. Cox, University of ManitobaFollow

Document Type

Article

Date of this Version

4-2008

Comments

Published in Insurance: Mathematics and Economics 42:2 (April 2008), pp. 628-637; doi 10.1016/j.insmatheco.2007.06.005 Copyright © 2007 Elsevier Ltd. Used by permission. http://www.elsevier.com/locate/ime

Abstract

Securitization with payments linked to explicit mortality events provides a new investment opportunity to investors and financial institutions. Moreover, mortality-linked securities provide an alternative risk management tool for insurers. As a step toward un¬derstanding these securities, we develop an asset pricing model for mortality-based securities in an incomplete market framework with jump processes. Our model nicely explains opposite market outcomes of two existing pure mortality securities.