Hedging Longevity Risk: Does the Structure of the Financial Instrument Matter?

Richard D. MacMinn, Nan Zhu

Research output: Contribution to journalArticlepeer-review


Longevity-linked securities can be constructed either as cash flow hedging instruments or as value hedging instruments. This article studies the interaction between the structure of longevity-linked securities and shareholder value. Relying on a strand of literature that investigates corporate risk management decisions made in the interests of shareholders, we present a framework that compares cash flow hedges with value hedges. Both our theoretical model and numerical experiments show that value hedging dominates cash flow hedging in the context of management decisions being made to maximize shareholder value. This finding provides an explanation for the failure of some attempted issues of longevity risk transfer instruments and suggests efficient alternate structures.

Original languageEnglish (US)
Pages (from-to)S373-S384
JournalNorth American Actuarial Journal
Issue numberS1
StatePublished - 2021

All Science Journal Classification (ASJC) codes

  • Statistics and Probability
  • Economics and Econometrics
  • Statistics, Probability and Uncertainty


Dive into the research topics of 'Hedging Longevity Risk: Does the Structure of the Financial Instrument Matter?'. Together they form a unique fingerprint.

Cite this