Title page for ETD etd-06262012-190659

Document Type Master's Dissertation
Author Simpson, Nathaniel
Email simpsonn@out.co.za
URN etd-06262012-190659
Document Title Trading mortality
Degree MSc
Department Mathematics and Applied Mathematics
Advisor Name Title
Prof E Mare Supervisor
  • mortality derivatives
  • market consistent methods
  • Lee-Carter models
  • stochastic mortality
Date 2012-04-13
Availability unrestricted
This dissertation sets out to describe a set of financial instruments whose cash flows are driven by the movements in some underlying population's mortality rates. For example, a longevity bond where the coupons are determined with reference to the proportion of the initial population that are alive at the coupon date. Other examples include mortality swaps and mortality swaptions which are analogous to interest rate swaps and interest rate swaptions.

It also aims to show there are risks associated with mortality and that these mortality driven instruments can be used to manage some of these risks.

These instruments should also enable portfolios that replicate mortality driven cash ows to be constructed. This would in turn allow the market consistent valuation of these cash flows.

To construct a pricing framework for these mortality based instruments a stochastic mortality model is needed. In this dissertation the stochastic mortality model used was the Lee-Carter model. The Lee-Carter model in essence models mortality rates per age by calendar year or cohort year using Time Series techniques.

Copyright 2011, University of Pretoria. All rights reserved. The copyright in this work vests in the University of Pretoria. No part of this work may be reproduced or transmitted in any form or by any means, without the prior written permission of the University of Pretoria

Please cite as follows:

Simpson, N 2011, Trading mortality, MSc dissertation, University of Pretoria, Pretoria, viewed yymmdd < http://upetd.up.ac.za/thesis/available/etd-06262012-190659 / >


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