Mortality/Longevity Risk-Minimization with or without Securitization

This paper addresses the risk-minimization problem, with and without mortality securitization, à la Föllmer–Sondermann for a large class of equity-linked contracts when no model death time is specified. framework includes situations in which correlation between market arbitrary general, hence leads to case where there are two levels information—the public information, generated by financial assets, larger flow information that contains additional knowledge about an insured. By enlarging filtration, uncertainty its entailed risk fully considered any mathematical restriction. Our key tool lies our optional martingale representation, states filtration stopped at can be decomposed into precise orthogonal local martingales. allows us derive dynamics value processes mortality/longevity securities used decompose liability sum risks means basis. The first main contribution this resides quantifying, as explicitly possible, effect on risk-minimizing strategy determining optimal enlarged terms strategies smaller filtration. second consists finding insurance securitization investing stocks one (or more) derivatives such longevity bonds. generalizes existing literature using many directions.