Longevity swaps - Oh no! Not again!

by David Davison   •  
Blog
Thought it was interesting that Credit Suisse, an investment bank, is involved in the Babcock longevity swap. Given the sectors performance in relation to collateralised debt instruments (synthetic or otherwise) and credit default swaps (and you would think a bank might understand the risks associated with debt and credit default!) how confident are we that they understand the risks associated with longevity? (not an area banks have claimed expertise in the past).  No doubt they have very sophisticated financial models in place and everybody understands the detail behind the contract...... Or at least Tommy from product development says he understands it, and if that’s the case it can’t be that complicated..... Seems to me, given a premium is being paid etc, that this is really an insurance contract, but this type of product isn’t regulated so I guess that’s ok...... But at least consultants have a new gimmick, sorry, product to flog........ Its déjà vu all over again!!! The attached is the best explanation of how a hedge fund works that I’ve ever come across. Thank heavens for Dilbert!! How a Hedge Fund works!

Further reading

The threat of inflation

Blog
by Brendan McLean   •  

Government spending in response to Covid-19

Blog
by James Sweetnam   •  

Adding value for the PPF

Blog
by Julie-Anne Jones   •  

More Insights?