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DISCUSSION PAPER PI-1504

Modelling Longevity Bonds: Analysing the Swiss Re Kortis Bond

Andrew Hunt and David Blake.

Abstract

A key contribution to the development of the traded market for longevity risk was the issuance of the Kortis bond, the world's first longevity trend bond, by Swiss Re in 2010. We analyse the design of the Kortis bond, develop suitable mortality models to analyse its payoff and discuss the key risk factors for the bond. We also investigate
how the design of the Kortis bond can be adapted and extended to further develop the market for longevity risk.

Keywords: Mortality modelling, age/period/cohort models, general procedure, cointegration, cohort effects, Kortis bond.