Hello I would like to fully understand: a. What exactly is longevity swap b. Is longevity bond the same as longevity swap ? if not - what's the difference between them. Thanks in advance, Amit
Hi Amit There is relatively little in the SA4 Course Notes about longevity swaps and longevity bonds and I encourage you to Google to find information online about these assets, because the longevity swap market in particular is a rapidly developing area. However, to answer your question. No, they are not the same thing. Broadly speaking: A longevity swap is a swap where the size of the payments from one of the two parties to the other depends on the longevity of a group of members or a longevity index. So, for example, the trustees of a pension scheme may take out a swap, paying fixed payments and the other party will make payments the size of which depend on the longevity of a group of lives. (If longevity is higher than expected, then the payments will be bigger than expected.) A longevity bond is a bond where the size of the coupon payments (and perhaps any final redemption payment) depend on the longevity of a group of lives. There are lots of variations / permutations. Any other readers got any experience or good references they can share? Gresham
