Investigating the publication of Mortality Bonds in Iran and its pricing

Rastegar, M.A.; Manshori, Z.

doi:10.22056/ijir.2020.03.05

Document Type : Original Research Paper

Authors

M.A. Rastegar ¹
Z. Manshori ²

¹ Department of Financial Engineering, Faculty of Industrial and Systems Engineering, Tarbiat Modares University, Tehran, Iran

² Department of Financial Engineering, Faculty of Management, Khatam University, Tehran, Iran

https://doi.org/10.22056/ijir.2020.03.05

Abstract

Objective: This research was conducted with the aim of examining mortality bonds, which are considered an attractive investment opportunity for the capital market, a risk management tool and a new source of financing for insurance companies, and a tool for diversifying the investment portfolio and increasing its yield for investors.
Methodology: In this research, the mortality rate of 5-year age groups was estimated between 1996 and 2016, and the parameters of the Lee Carter model were estimated using the single value analysis method. In the next step, using Monte Carlo simulation, different scenarios were produced for Iran's mortality index in the next three years. Finally, a sensitivity analysis was performed on the profit rate and disaster threshold to examine the price reaction to changes in the profit rate and changes in the threshold interval.
Findings: The results showed that at the end of the three-year life of these bonds, their price increases with the increase in the interest rate. Also, as the threshold level increases, the price of these bonds increases; Because the possibility of non-reimbursement by the publisher is reduced. If the issuer sets the threshold interval to two units, keeping other conditions constant, the price of these bonds will decrease.
Conclusion: In this research, it was tried to introduce death certificates as a financial instrument available in the world markets and investigate the possibility of its publication in Iran. In addition, with the income discount method, the price of these bonds should be determined for investors and domestic issuers.

Keywords

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https://www.artemis.bm/news/q1-2017-catastrophe-premiums-up-at-renre-davinci-profits-decline/

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Iranian Journal of Insurance Research

Investigating the publication of Mortality Bonds in Iran and its pricing

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Volume 9, Issue 3 - Serial Number 33
July 2020
Pages 310-325

Investigating the publication of Mortality Bonds in Iran and its pricing

References

References

Letters to Editor

Send comment about this article

Volume 9, Issue 3 - Serial Number 33July 2020Pages 310-325

Volume 9, Issue 3 - Serial Number 33
July 2020
Pages 310-325