The longevity risk is still taken by the pension fund as a whole and will probably be taken
by individual participants in the upcoming new Dutch pension system. In this thesis the
main question is how the value of pension entitlements will change if the mortality risk is
transferred from the pension fund to the participant. The focus of the research in this thesis
is on the Dutch population because of these upcoming changes.
As a basis for the research three mortality models have been used which are discussed
and analyzed extensively. These are the Lee-Carter model, the Plat 2009 model and the AG
Prognosetafel 2012-2062 and all three models are applied to the Dutch population. The last
model is originally a deterministic model, but within this thesis a method is described to
transform it into a stochastic model.
Pricing of longevity products has to be done using theorectical assumptions, since there is
almost no real longevity market. Along with his mortality model Plat introduced a method
to determine risk neutral prices for his mortality table. These prices are calibrated by using
q-forwards. In this thesis this method is implemented for the AG Prognosetafel 2012-2062
and the Lee-Carter model as well.
The resulting risk neutral prices for all the models are used to value longevity risk by
using a s-forward. In this way the value of the transfer of longevity risk from the pension
fund to the individual is estimated in a theorectical framework.