Hedging Longevity Risk using Longevity Swaps: A case study of the Social Security and National Insurance Trust (SSNIT)
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Date
April, 2016
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Abstract
E ective management of longevity risk is essential for every institution which
is exposed to longevity risk. De ned bene t schemes in Ghana are especially
exposed to longevity risk due to increasing life expectancy in Ghana. In this
study we explore a hypothetical hedging strategy based on longevity swaps for
the SSNIT pension scheme. We use the Cairns-Blake-Dowd model to forecast
future mortality rates of pensioners from age 71 to 90. With the forecasted
mortality rates we designed longevity swap contract whereby realized mortality
rates would be swapped with the forecasted expected mortality rates. The payout
structure under the swap ensures that the SSNIT's liability is completely hedged
against longevity risk.
Description
A thesis submitted to the Department of Mathematics,
Kwame Nkrumah University of Science and Technology in
partial fulfillment of the requirement for the degree of MSc. Actuarial Science
,.