Author, as appears in the article.: de Andres-Sanchez, Jorge; Gonzalez-Vila Puchades, Laura;

Department: Gestió d'Empreses

URV's Author/s: De Andrés Sànchez, Jorge

Keywords: Sensitivity analysis Seguro de vida Multiplicador de mortalidad Mortality multiplier Life settlement Life insurance Life expectancy Hedging longevity risk Esperanza de vida Duration Analisis de sensibilidad

Abstract: A life settlement is a financial transaction by which an existing life insurance policy is sold to an investor for a greater price than its cash surrender value. In this way, the investor undertakes to pay, if any, the outstanding premiums and has the right to receive the death benefit when the insured dies. This work carries out a descriptive analysis of this type of transaction and a study of its main quantitative aspects. Thus, among other aspects, an overview of the product is offered and its main agents, the nature of the parameters involved in its value and the risks related to it are described. In regards to the quantitative point of view, a new way of analysing the sensitivity of the price of a life settlement to changes in the insured's life expectancy is introduced. Indeed, we extend the duration and convexity indicators of Stone and Zissu (2008), which use a deterministic approach, to the analytical framework provided by the probabilistic valuation method. Then, we propose to measure the sensitivity of this product to changes in the insured's mortality multiplier, and not in their life expectancy. The paper also describes the applicability of the new measures for risk management purposes.

Thematic Areas: Strategy and management Revistas de ciencias economicas y empresariales Organizational behavior and human resource management Marketing Industrial relations Finance Economics, econometrics and finance (miscellaneous) Economics Economia Ciencias sociales Business, management and accounting (miscellaneous) Business and management Business and international management Business

licence for use: https://creativecommons.org/licenses/by/3.0/es/

Author's mail: jorge.deandres@urv.cat

Author identifier: 0000-0002-7715-779X

Record's date: 2023-06-17

Papper version: info:eu-repo/semantics/publishedVersion

Link to the original source: https://addi.ehu.es/handle/10810/52000

Licence document URL: http://repositori.urv.cat/ca/proteccio-de-dades/

Papper original source: Cuadernos De Gestion. 21 (2): 19-34

APA: de Andres-Sanchez, Jorge; Gonzalez-Vila Puchades, Laura; (2021). Life settlements: análisis descriptivo y aspectos cuantitativos. Cuadernos De Gestion, 21(2), 19-34. DOI: 10.5295/cdg.191209lg

Article's DOI: 10.5295/cdg.191209lg

Entity: Universitat Rovira i Virgili

Journal publication year: 2021

Publication Type: Journal Publications