A DCC-GARCH multi-population mortality model and its applications to pricing catastrophic mortality bonds

This paper considers the pricing problem of catastrophic mortality bonds, which have been traded among financial institutions since about 10 years ago. We first use a DCC-GARCH model to capture the evolution of the aggregate mortality rates for five developed countries jointly. We then utilize the estimated model to price an illustrative catastrophic mortality bond, which, similar to most of the existing catastrophic mortality bonds, is linked to the mortality of multiple populations. We also study the impact of various features of the DCC-GARCH model on the pricing results.