Longevity Risk And Capital Markets: The 2009-2010 Update

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Longevity risk and related capital market solutions have grown increasingly important in recent years, both in academic research and in the markets the authors refer to as the new Life Markets, i.e., the capital markets that trade longevity-linked assets and liabilities. Mortality improvements around the world are putting more and more pressure on governments, pension funds, life insurance companies as well as individuals, to deal with the longevity risk they face. At the same time, capital markets can, in principle, provide vehicles to hedge longevity risk effectively and transfer the risk from those unwilling or unable to handle it to those willing to speculate in such risk for increased returns or who have a counterpoising risk that longevity risk can hedge, e.g., life insurance.