Longevity hedge effectiveness using socioeconomic indices
研究了长寿对冲中的社会经济基差风险，发现消除基差风险能提高对冲的成本效益，且年化成本不超过0.16%的额外回报率。
This paper evaluates socioeconomic basis risk in longevity hedging. Using data for a full population stratified into socioeconomic groups, we explore the benefits and costs of two alternative hedging strategies, with and without basis risk, in the capital market. The benefit of the longevity hedge is represented by the risk reduction in the variability of a life annuity, whereas the cost is the notional amount of hedging contracts times the actuarial risk premium. We find that hedging is more cost-effective for the annuity provider when basis risk is eliminated. Moreover, it allows for a higher degree of hedge effectiveness at a cost that is equivalent to a hedge where basis risk is present. Finally, the yearly expenses related to hedging longevity risk requires, at most, an extra added rate of return of no more than 0.16%.