Abstract
In recent years, the problem of aging in Taiwan's population is getting worse, which is second only to Japan in Asia. Besides, Taiwan is officially defined as the aging society by the United Nations in 1993. The method of how to effectively manage the aging problem has become a national issue. In risk management, people have gradually paid their attention to both the mortality bonds and the longevity bonds which are purely linked to mortality rate. There are many ways to price mortality-linked instruments in literatures. In order to circumvent the model risk and the parameter risk which arise from the other methods, we attempts to use the canonical valuation approach with nonparametric method to forecast mortality rate for pricing longevity bonds. The results of this study will be also compared to the pricing of Wang transform, and we hope that this study may provide a better pricing method for longevity bonds.