“How to Start a Capital Market in Longevity Risk Transfers,” by David Blake and Enrico Biffis (PI-1207, September 2012, .pdf format, 9p.).
Abstract:
A market in longevity risk transfers can succeed if longevity risk exposures are optimally pooled, tranched, and securitized. This is necessary to deal with the issue of asymmetric information, where the seller or hedger of the exposure has more privately held information about it than any potential investor in the risk. The optimal way to transfer longevity risk is through a principal-at-risk bond specifically designed to minimize the sensitivity of the bond’s value to private information while appealing to investors with different risk appetites.
