Abstract
A new type of retirement bond is proposed called an SM bond. SM bonds are long dated government bonds divisible into two parts: a survivorship (S) part and a mortality (M) part. Each SM bond is associated with a particular age. SM bonds associated with a particular age are only purchasable by (originators) of that age. The SM bond is then splittable into an S and M component. The S part must be retained by the originator, who receives the face value of the bond if he/she is alive at maturity. For originators who die prior to the maturity date, the maturity value of the SM bond is assigned to a mortality pool. The holder of the M part of the bond receives the annual bond coupon, and at maturity a pro rata share of the mortality pool. M bonds are tradable: holders can sell their M bonds to anyone, at any time. It is envisaged different age bonds are issued every year for ages say 30-64 each with say a 35-year term. The market will be regularly informed about the mortality experience, and the market price of the M bonds will vary over time to reflect that experience.
| Language | English |
|---|---|
| Pages | 121-149 |
| Number of pages | 29 |
| Journal | Journal of Risk and Insurance |
| Volume | 86 |
| Issue number | 1 |
| Early online date | 22 Feb 2017 |
| DOIs | |
| Publication status | Published - Mar 2019 |
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SM bonds - a new product for managing longevity risk. / de Jong, Piet; Ferris, Shauna.
In: Journal of Risk and Insurance, Vol. 86, No. 1, 03.2019, p. 121-149.Research output: Contribution to journal › Article › Research › peer-review
TY - JOUR
T1 - SM bonds - a new product for managing longevity risk
AU - de Jong, Piet
AU - Ferris, Shauna
PY - 2019/3
Y1 - 2019/3
N2 - A new type of retirement bond is proposed called an SM bond. SM bonds are long dated government bonds divisible into two parts: a survivorship (S) part and a mortality (M) part. Each SM bond is associated with a particular age. SM bonds associated with a particular age are only purchasable by (originators) of that age. The SM bond is then splittable into an S and M component. The S part must be retained by the originator, who receives the face value of the bond if he/she is alive at maturity. For originators who die prior to the maturity date, the maturity value of the SM bond is assigned to a mortality pool. The holder of the M part of the bond receives the annual bond coupon, and at maturity a pro rata share of the mortality pool. M bonds are tradable: holders can sell their M bonds to anyone, at any time. It is envisaged different age bonds are issued every year for ages say 30-64 each with say a 35-year term. The market will be regularly informed about the mortality experience, and the market price of the M bonds will vary over time to reflect that experience.
AB - A new type of retirement bond is proposed called an SM bond. SM bonds are long dated government bonds divisible into two parts: a survivorship (S) part and a mortality (M) part. Each SM bond is associated with a particular age. SM bonds associated with a particular age are only purchasable by (originators) of that age. The SM bond is then splittable into an S and M component. The S part must be retained by the originator, who receives the face value of the bond if he/she is alive at maturity. For originators who die prior to the maturity date, the maturity value of the SM bond is assigned to a mortality pool. The holder of the M part of the bond receives the annual bond coupon, and at maturity a pro rata share of the mortality pool. M bonds are tradable: holders can sell their M bonds to anyone, at any time. It is envisaged different age bonds are issued every year for ages say 30-64 each with say a 35-year term. The market will be regularly informed about the mortality experience, and the market price of the M bonds will vary over time to reflect that experience.
UR - http://www.scopus.com/inward/record.url?scp=85013498346&partnerID=8YFLogxK
U2 - 10.1111/jori.12203
DO - 10.1111/jori.12203
M3 - Article
VL - 86
SP - 121
EP - 149
JO - Journal of Risk and Insurance
T2 - Journal of Risk and Insurance
JF - Journal of Risk and Insurance
SN - 0022-4367
IS - 1
ER -