Analysis of the Efficient Frontier for Life Settlements in the Presence of Longevity Risk

Abstract

保單貼現商品具有與傳統投資工具相關性低的特性，為近年來資本市場相當重視的投資工具。本研究以效率前緣來分析投資組合中加入保單貼現商品的投資效益。由於老年保單貼現商品價格主要受死亡率影響，故本研究藉由隨機死亡率模型來建構保單貼現商品的定價，亦探討年齡、死亡率的改善及交易成本對投資組合表現的影響。

This study attempts to analyze the effect of portfolio selection when life settlements, which are considered to have zero or low correlation with traditional investment instruments, are taken into account. We utilize the efficient frontier to assess the investment performance of a portfolio that includes three assets, namely, stocks, bonds, and life settlements. Because mortality plays an important role in determining the prices of life settlements, we consider a stochastic mortality model in our pricing framework to reflect longevity risk. The impacts of age effect, mortality improvement, and transaction costs on life settlements and investment performance are investigated numerically.