Survivor Swaps

17 Pages Posted: 8 May 2006  

Kevin Dowd

Nottingham University Business School (NUBS)

David P. Blake

City University London - Cass Business School - The Pensions Institute

Andrew J. G. Cairns

Heriot-Watt University - Department of Actuarial Science & Statistics

Paul Dawson

Kent State University

Abstract

A survivor swap (SS) is an agreement to exchange cash flows in the future based on the outcome of at least one survivor index. This article discusses the possible uses of SSs as instruments for managing, hedging, and trading mortality-dependent risks. SSs are especially useful for insurance companies, but also offer other interested parties low beta avenues into the acquisition of mortality risk exposure. The article also investigates vanilla SSs in some detail, and suggests how their premiums and values might be determined in an incomplete market setting.

Suggested Citation

Dowd, Kevin and Blake, David P. and Cairns, Andrew J. G. and Dawson, Paul, Survivor Swaps. Journal of Risk and Insurance, Vol. 73, No. 1, pp. 1-17, March 2006. Available at SSRN: https://ssrn.com/abstract=886797 or http://dx.doi.org/10.1111/j.1539-6975.2006.00163.x

Kevin Dowd (Contact Author)

Nottingham University Business School (NUBS) ( email )

Jubilee Campus
Wollaton Road
Nottingham, NG8 1BB
United Kingdom

David P. Blake

City University London - Cass Business School - The Pensions Institute ( email )

London, EC2Y 8HB
Great Britain
+44 (0) 20-7040-5143 (Phone)
+44 (0) 20-7040-8881 (Fax)

Andrew J. G. Cairns

Heriot-Watt University - Department of Actuarial Science & Statistics ( email )

Edinburgh EH14 4AS Scotland
United Kingdom

Paul Dawson

Kent State University ( email )

Kent, OH 44242
United States
330-672-1242 (Phone)

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