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

Superplastic forming and diffusion bonding of rapidly solidified, dispersion strengthened aluminum alloys for elevated temperature structural applications

Rapidly solidified alloys, based upon the Al-Fe-V-Si system and designed for elevated temperature applications, were evaluated for superplasticity and diffusion bonding behavior. Alloys with 8, 16, 27, and 36 volume percent silicide dispersoids were produced; dispersoid condition was varied by rolling at 300, 400, and 500 C (572, 752, and 932 F). Superplastic behavior was evaluated at strain rates from 1 x 10(exp -6)/s to 8.5/s at elevated temperatures. The results indicate that there was a significant increase in elongation at higher strain rates and at temperatures above 600 C (1112 F). However, the exposure of the alloys to temperatures greater than 600 C (1112 F) resulted in the coarsening of the strengthening dispersoid and the degradation of mechanical properties. Diffusion bonding was possible using low gas pressure at temperatures greater than 600 C (1112 F) which also resulted in degraded properties. The bonding of Al-Fe-V-Si alloys to 7475 aluminum alloy was performed at 516 C (960 F) without significant degradation in microstructure. Bond strengths equal to 90 percent that of the base metal shear strength were achieved. The mechanical properties and microstructural characteristics of the alloys were investigated

On the Throughput of Channels that Wear Out

This work investigates the fundamental limits of communication over a noisy discrete memoryless channel that wears out, in the sense of signal-dependent catastrophic failure. In particular, we consider a channel that starts as a memoryless binary-input channel and when the number of transmitted ones causes a sufficient amount of damage, the channel ceases to convey signals. Constant composition codes are adopted to obtain an achievability bound and the left-concave right-convex inequality is then refined to obtain a converse bound on the log-volume throughput for channels that wear out. Since infinite blocklength codes will always wear out the channel for any finite threshold of failure and therefore cannot convey information at positive rates, we analyze the performance of finite blocklength codes to determine the maximum expected transmission volume at a given level of average error probability. We show that this maximization problem has a recursive form and can be solved by dynamic programming. Numerical results demonstrate that a sequence of block codes is preferred to a single block code for streaming sources.Comment: 23 pages, 1 table, 11 figures, submitted to IEEE Transactions on Communication

Skip-Sliding Window Codes

Constrained coding is used widely in digital communication and storage systems. In this paper, we study a generalized sliding window constraint called the skip-sliding window. A skip-sliding window (SSW) code is defined in terms of the length $L$ of a sliding window, skip length $J$, and cost constraint $E$ in each sliding window. Each valid codeword of length $L + kJ$ is determined by $k+1$ windows of length $L$ where window $i$ starts at $(iJ + 1)$th symbol for all non-negative integers $i$ such that $i \leq k$; and the cost constraint $E$ in each window must be satisfied. In this work, two methods are given to enumerate the size of SSW codes and further refinements are made to reduce the enumeration complexity. Using the proposed enumeration methods, the noiseless capacity of binary SSW codes is determined and observations such as greater capacity than other classes of codes are made. Moreover, some noisy capacity bounds are given. SSW coding constraints arise in various applications including simultaneous energy and information transfer.Comment: 28 pages, 11 figure

Spin dynamics in the antiferromagnetic phase for electron-doped cuprate superconductors

Based on the $t$-$t'$-$t''$-$J$ model we have calculated the dynamical spin susceptibilities in the antiferromagnetic (AF) phase for electron-doped cuprates, by use of the slave-boson mean-field theory and random phase approximation. Various results for the susceptibilities versus energy and momentum have been shown at different dopings. At low energy, except the collective spin-wave mode around $(\pi,\pi)$ and 0, we have primarily observed that new resonance peaks will appear around $(0.3\pi,0.7\pi)$ and equivalent points with increasing doping, which are due to the particle-hole excitations between the two AF bands. The peaks are pronounced in the transverse susceptibility but not in the longitudinal one. These features are predicted for neutron scattering measurements.Comment: 5 pages, 3 figures, published version with minor change