Pricing Joint-live Reverse Mortgage Using Copula Approach

• Main Authors: Chia-hung Li, 李家宏
• Other Authors: Sharon S. Yang
• Format: Others
• Language: en_US
• Published: 2010
• Online Access: http://ndltd.ncl.edu.tw/handle/29813032764818278024

碩士 === 國立中央大學 === 統計研究所 === 98 === Because of low mortality rates and decreased fertility, as well as the subsequent increased aging problem, insufficient pensions have become a serious issue in Taiwan. Besides, the high home ownership rate for elders in Taiwan is the other reason that regard reverse mortgage as a new resource option for retirement except for tradition resources, such as public and private pensions, commercial annuities, individual savings and investments. The purpose of this paper is build a modeling and pricing framework, which consider the correlation between spouses’ mortality, to assess a suitable value of reverse mortgage. We propose Lee-Carter model to fit the actually mortality data, use copula approach to measure the joint survival probability at each age and model the house price index via ARIMA process. We employ the conditional Esscher transform to price the non-recourse provision of joint-live reverse mortgages by using Monte Carlo simulation with Antithetic variance reduction.