Creating and Trading Building Block Mortality Derivatives To Transfer and Receive Mortality Risk In A Liquid Market

A computer-implemented method for establishing a plurality of building block mortality derivatives that can be used to hedge on mortality risk or longevity risk, comprising:

• establishing a plurality of age ranges corresponding to a mortality rate model, wherein the mortality rate model is based on the probability of mortality q=f(g, x, t), where g is gender (M/F), x is age, and t is time;
• establishing a mortality rate related index to be applied to building block derivatives;
• establishing a payout based on the performance of the mortality rate related index;
• and
• creating a plurality of building block mortality derivatives each hedging risk for a specified age range and gender;
• wherein the payout for a building block mortality derivative correlates to the performance of the mortality rate related index corresponding to the age range and gender of the mortality derivative;
• thereby providing a plurality of age-segmented, gender-specific mortality derivatives to hedge risk.

A computer-implemented system for establishing a plurality of building block mortality derivatives that can be used to hedge against or speculate on mortality risk, comprising:

• a computer readable media for storing a plurality of age ranges corresponding to a mortality rate model;
• a processor programmed with code executable for determining a mortality rate related index to be applied to building block derivatives;
• said processor programmed to establish at least one of a price and a payout based on at least one of the mortality rate model and the performance of the mortality rate related index;
• and
• a computer readable media for storing data of a plurality of building block mortality derivatives established in order to hedge risk for a specified age range;
• wherein the payout for a building block mortality derivative correlates to the performance of the mortality rate related index corresponding to the age range of the mortality derivative;
• thereby providing a plurality of age-segmented mortality derivatives to hedge risk.