Fair Value Measurement in the Life Settlement Market
Journal
Journal of Fixed Income
ISSN
1059-8596
Type
journal article
Date Issued
2020-01
Author(s)
Abstract (De)
IFRS 13 and the AIFMD require assets to be held at fair value. Life settlement prices are commonly determined by present value calculus. Yet, the asset class lacks an established approach
for the determination of adequate discount rates. We estimate historical yield spreads used for pricing based on 2,863 transactions that occurred between 2011 and 2016. We then explain their cross section through hedonic regression methodology. Out-of-sample results indicate that market-consistent life settlement prices can be conclusively predicted using discount rates generated by our model.
for the determination of adequate discount rates. We estimate historical yield spreads used for pricing based on 2,863 transactions that occurred between 2011 and 2016. We then explain their cross section through hedonic regression methodology. Out-of-sample results indicate that market-consistent life settlement prices can be conclusively predicted using discount rates generated by our model.
Language
English
Refereed
Yes
Publisher
Inst. Investor, Inc.
Volume
29
Number
4
Start page
100
End page
123
Subject(s)
Division(s)
Eprints ID
258978