Basis Risk and Pension Schemes: A Relative Modelling Approach

Blake, D. & Hunt, A. (2016). Basis Risk and Pension Schemes: A Relative Modelling Approach (Report No. PI-1601). London, UK: Pensions Institute.

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Abstract

For many pension schemes, a shortage of data limits their abilityto use sophisticated stochastic mortality models to assess and managetheir longevity risk. In this study, we develop a relative model formortality, which compares the evolution of mortality rates in a sub-population with that observed in a larger reference population. Weapply this relative approach to data from the CMI Self-AdministeredPension Scheme study, using UK population data as a reference. Wethen use the relative approach to investigate the potential differencesin the evolution of mortality rates between these two populations andfind that, in many practical situations, basis risk is much less of aproblem than is commonly believed.

Item Type: Monograph (Discussion Paper)
Additional Information: Also available at http://www.pensions-institute.org/workingpapers/wp1601.html
Uncontrolled Keywords: Mortality modelling, age/period/cohort models, relative models, longevity basis risk
Subjects: H Social Sciences > HA Statistics
H Social Sciences > HD Industries. Land use. Labor > HD61 Risk Management
H Social Sciences > HG Finance
Divisions: Cass Business School > Faculty of Finance
Related URLs:
URI: http://openaccess.city.ac.uk/id/eprint/17351

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