Building knowledge-based economies: research projects in knowledge management and knowledge transfer

Small and medium-sized enterprises (SMEs) are viewed as the growth engines of the new knowledgebased economy. This new economic growth model differs from the old in significant ways, many of which are related to the knowledge base that will be required by the SMEs. Based upon prior research a set of factors important to the success of SMEs in a knowledge-based economy is described. Focusing on those factors related to the knowledge base, the paper concludes with a set of research questions and brief descriptions of three research projects on knowledge management and knowledge transfer

Hedging Pure Endowments with Mortality Derivatives

In recent years, a market for mortality derivatives began developing as a way to handle systematic mortality risk, which is inherent in life insurance and annuity contracts. Systematic mortality risk is due to the uncertain development of future mortality intensities, or {\it hazard rates}. In this paper, we develop a theory for pricing pure endowments when hedging with a mortality forward is allowed. The hazard rate associated with the pure endowment and the reference hazard rate for the mortality forward are correlated and are modeled by diffusion processes. We price the pure endowment by assuming that the issuing company hedges its contract with the mortality forward and requires compensation for the unhedgeable part of the mortality risk in the form of a pre-specified instantaneous Sharpe ratio. The major result of this paper is that the value per contract solves a linear partial differential equation as the number of contracts approaches infinity. One can represent the limiting price as an expectation under an equivalent martingale measure. Another important result is that hedging with the mortality forward may raise or lower the price of this pure endowment comparing to its price without hedging, as determined in Bayraktar et al. [2009]. The market price of the reference mortality risk and the correlation between the two portfolios jointly determine the cost of hedging. We demonstrate our results using numerical examples.Comment: 33 Pages, 1 figur