Longevity Risk

Don’t know if anyone else gets the CFAI magazine, but the recent one has a cover story about Longevity risk. Not sure it means anything, but the year of the Treynor debacle on LII was the year they gave him some award.

Is longevity risk in the L3 curriculum and if so, in which study session? Thank you

It’s in Reading #19, Lifetime Financial Advice - Human Capital, Asset Allocation and Life Insurance

It is a risk of living above expected years. So after retirement, you said that you will live for next 20 years and invest your portfolio with that time frame. So if you live beyond 20 but your portfolio doesn’t have anything left in the account for you to spend.

Stupid old people - refusing to die and messing everything up.

Hello Mister Walrus Wrote: ------------------------------------------------------- > Stupid old people - refusing to die and messing > everything up. Dr Kervorkian on speed dial …problem solved

maybe you do want them hanging around…some big dollars to be made selling annuities

Whatever money that can be made off old people is offset by health care costs.

I read this a bit ago, I think some type of annuity was the best hedge.

This was written from the other point of view, as in how do annuity products hedge the risk. I didn’t finish it yet, but the early stuff was talking about longevity swaps…I pity the poor LII candidate that they make value that sh!t. Also some talk about bonds issued that peg to mortality index, but they didn’t really take off. The curriculum deals with it from the investor side if I recall and they recommend either an annuity or model in longer life expectancy to accomodate longevity risk.