Pricing Buy‐Ins and Buy‐Outs

26 Pages Posted: 14 Apr 2017

See all articles by Yijia Lin

Yijia Lin

University of Nebraska at Lincoln

Tianxiang Shi

Temple University - Risk Management & Insurance & Actuarial Science

Ayse Arik

Hacettepe University

Date Written: April 2017

Abstract

Pension buy‐ins and buy‐outs have become an important aspect of managing pension risk in recent years. As a step toward understanding these pension de‐risking instruments, we develop models for pricing investment risk and longevity risk embedded in pension buy‐ins and buy‐outs. We also bring a contingent‐claims framework to price credit risk of buy‐in bulk annuities. Overall, our model can be used to assess the pricing of investment, longevity, and credit risks being transferred in pension buy‐in and buy‐out transactions.

Suggested Citation

Lin, Yijia and Shi, Tianxiang and Arik, Ayse, Pricing Buy‐Ins and Buy‐Outs (April 2017). Journal of Risk and Insurance, Vol. 84, Issue S1, pp. 367-392, 2017. Available at SSRN: https://ssrn.com/abstract=2952786 or http://dx.doi.org/10.1111/jori.12159

Yijia Lin (Contact Author)

University of Nebraska at Lincoln ( email )

Lincoln, NE 68588
United States

Tianxiang Shi

Temple University - Risk Management & Insurance & Actuarial Science ( email )

Fox School of Business and Management
1801 Liacouras Walk
Philadelphia, PA 19122
United States

Ayse Arik

Hacettepe University ( email )

Ankara
Turkey

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