Financial Innovation for an Aging World

52 Pages Posted: 3 Aug 2006

See all articles by Olivia S. Mitchell

Olivia S. Mitchell

University of Pennsylvania - The Wharton School; National Bureau of Economic Research (NBER)

John Piggott

University of New South Wales (UNSW) - Australian School of Business, School of Economics

Michael Sherris

University of New South Wales - ARC Centre of Excellence in Population Ageing Research and School of Risk and Actuarial Studies; UNSW Australia Business School

Shaun Yow

University of New South Wales (UNSW)

Multiple version iconThere are 2 versions of this paper

Date Written: 2006

Abstract

Over the last half-century, around the world, many nations have seen plummeting fertility rates and mounting life expectancies. These two factors are the engine behind unprecedented global aging. In this paper, we explore how the demographic transition may influence financial markets and, in turn, how financial market innovation might help resolve concerns flowing from global aging trends. We first provide context by reviewing the economics, finance, and insurance-related literature on how global aging patterns may influence capital markets. We then turn to insurance markets, and discuss a range of products and policies, including both retail and wholesale financial offerings for various forms of life annuities, long-term care benefits, reverse mortgages, securitization of longevity risk, inflation-protected assets, reinsurance, guarantees, derivative contracts on residential property price indices, mortality swaps and longevity derivative contracts. We also indicate how new public-private partnerships might be beneficial in enhancing the future environment for old-age risk management.

Keywords: Aging, insurance, old-age risk, annuities, pensions, long-term care, reverse mortgage, securitization, longevity risk, guarantee, mortality swaps

JEL Classification: G22, G23, J11, J14, J18, J21, J26, N2

Suggested Citation

Mitchell, Olivia S. and Piggott, John and Sherris, Michael and Yow, Shaun, Financial Innovation for an Aging World (2006). Pension Research Council. Available at SSRN: https://ssrn.com/abstract=921041 or http://dx.doi.org/10.2139/ssrn.921041

Olivia S. Mitchell (Contact Author)

University of Pennsylvania - The Wharton School ( email )

Philadelphia, PA 19104-6365
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

John Piggott

University of New South Wales (UNSW) - Australian School of Business, School of Economics ( email )

High Street
Sydney, NSW 2052
Australia

Michael Sherris

University of New South Wales - ARC Centre of Excellence in Population Ageing Research and School of Risk and Actuarial Studies ( email )

UNSW Business School
Risk and Actuarial Studies
Sydney, NSW 2052
Australia
+61 2 9385 2333 (Phone)
+61 2 9385 1883 (Fax)

HOME PAGE: http://www.asb.unsw.edu.au/schools/Pages/MichaelSherris.aspx

UNSW Australia Business School ( email )

Sydney, NSW 2052
Australia

Shaun Yow

University of New South Wales (UNSW) ( email )

Kensington
High St
Sydney, NSW 2052
Australia

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