Chaplin / Aspinwall / Venn Life Settlements and Longevity Structures

Pricing and Risk Management
1. Auflage 2009
ISBN: 978-0-470-68485-6
Verlag: John Wiley & Sons
Format: EPUB
Kopierschutz: Adobe DRM (»Systemvoraussetzungen)

E-Book, Englisch, 274 Seiten, E-Book

Recent turbulence in the financial markets has highlighted the needfor diversified portfolios with lower correlations between thedifferent investments. Life settlements meet this need, offeringinvestors the prospect of high, stable returns, uncorrelated withthe broader financial markets.
This book provides readers of all levels of experience withessential information on the process surrounding the acquisitionand management of a portfolio of life settlements; the assessment,modelling and mitigation of the associated longevity, interest rateand credit risks; and practical approaches to financing and riskmanagement structures. It begins with the history of life insuranceand looks at how the need for new financing sources has led to thegrowth of the life settlements market in the United States.
The authors provide a detailed exploration of the mathematicalformulae surrounding the generation of mortality curves, drawing aparallel between the tools deployed in the credit derivativesmarket and those available to model longevity risk. Structuredproducts and securitisation techniques are introduced andexplained, starting with simple vanilla products and models beforeillustrating some of the investment structures associated with lifesettlements. Capital market mechanisms available to assist theinvestor in limiting the risks associated with life settlementportfolios are outlined, as are opportunities to use lifesettlement portfolios to mitigate the risks of traditional capitalmarkets. The last section of the book covers derivative products,either available now or under consideration, that will reduce orpotentially eliminate longevity risks within life settlementportfolios. It then reviews hedging and risk management strategiesand considers how to measure the effectiveness of riskmitigation.

Autoren/Hrsg.

Chaplin, Geoff

Aspinwall, Jim

Venn, Mark

Inhaltsverzeichnis

Introduction by Con Keating
1 Life Insurance: Primary and Secondary Markets
Introduction
1.1 History, application and termination of life insurance policies
1.2 Life Insurance policy types and underwriting
1.3 Development of the viatical settlement and life settlement markets
1.4 The parties involved in a life settlement transaction
1.5 The life settlement process
1.6 Legal issues
1.7 Other issues
2 Mortality and Credit Structures, Valuation and Risk
Introduction
2.1 CDS and CDO contracts
2.2 Valuation approach and data
2.3 The Poisson process
2.4 Single life mortality calculations
2.5 Correlation and portfolio calculations
2.6 Rating transactions
2.7 Risk management of a structured life settlements portfolio
3 Structured Products and Securitization
3.1 Securitization
3.1.2 Prestructures
3.2 Structured products
3.3 The risks of structured products
3.4 Modelling
3.5 Life Settlement pool (LSP)
3.6 Conclusion
4 Examples of LSP Securitization: A Principal Protected Fund
Introduction
4.1 A Simple example
4.2 Other pool examples
4.3 Group policies
4.4 Conclusion
Appendix: Sample product description outline
A4.1 Introduction
A4.2 Product description
A4.3 Marketing assessment
A4.4 Modelling and pricing
A4.5 Administration and accounting
A4.6 Conclusion
5 Capital Markets Products: Principal Protection
Introduction
5.1 Bond constructions
5.2 A zero coupon bond
5.3 A coupon bond
5.4 A convertible bond
5.5 Principal protection
5.6 Longevity bonds
5.7 Sharia compliant bonds
5.8 Power bonds
5.9 CIOs and PACs, TACs and VADAMSs
5.10 Equity-linked notes
5.11 Conclusion
6 Structured Financing: Guaranteed Loan repayment
Introduction
6.1 Project financing: Commercial and industrial uses
6.2 Retail product
6.3 Reverse mortgage or equity reversal programme
6.4 Asset swaps
6.5 The pension swap
6.6 A New CPPI product
6.7 Conclusion
7 Life Settlement Derivatives
Introduction
7.1 Longevity bonds
7.2 Asset Swap
7.3 Mortality curves
7.4 Futures and forwards
7.5 Options
7.6 Synthetic pools
7.7 Conclusion
8 Hedging
Introduction
8.1 Hedging longevity or extension risk
8.2 Hedging with inverse longevity bond
8.3 Futures-forwards
8.4 Options
8.5 Caps, floors and swaptions
8.6 Hedging liquidity risk
8.7 Hedging credit risk
8.8 HER (Hedge efficiency ratio) for an inverse longevity bond
8.9 Conclusion
Appendix
Bibliography
Index