Abstract: Longevity risk is the risk caused by the increasing life expectancy.
Governments face the challenge of financing an ageing population with longer life spans and providing
an environment conducive to private market solutions. Innovations such as securitization in the management
of longevity risk come to light in December 2003, when Swiss Re issued a three-year life catastrophe bond.
Managing longevity risk via mortality-linked securities to transfer, reduce, or share the longevity risk
is also meaningful for institutions and individuals alike. A fundamental question to study mortality-linked
securities is how to evaluate them properly. It can be answered by the no arbitrage theory with predicted
mortality rates using mortality models. Based on the observation of a strong logistic progression pattern
in the mortality of the U.S. population, we propose a stochastic logistic model. The parameters in the model
are then estimated using the data from the Human Mortality Database. We also calculated the EIB/BNP longevity
bond price as an example of the mortality-linked securities.