Longevity assets and their role in optial portfolios

Specialeforsvar ved Mathias Benjamin Bøgebjerg Hansen

Titel: Longevity assets and their role in optimal portfolios

Abstract: The purpose of this thesis is to study the optimal consumption and portfolio choice for an investor with stochastic mortality. In order to find a closed form solution the market is often assumed to be complete. The completeness assumption becomes quite strong when the mortality is stochastic as the investor needs an asset that can replicate the changes of mortality. Standard assets are usually assumed to be uncorrelated with mortality, so derivatives on the mortality are introduced. A zero-coupon longevity bond and a call-option with the realized survival probability as underlying are considered. The role of a mortality dependent derivative in an optimal portfolio is studied by consider-ing an optimization problem for an investor who wants to maximize his expected future consumption before his time of death. A numerical study is conducted to see how the optimal portfolios depend on the type of mortality dependent derivative available in the market 

Vejleder: Jesper Lund Pedersen
Censor:   Bjarne Astrup Jensen, CBS