How can I get Xpect regularly?
Xpect Data is available on a monthly subscription basis. You can order England & Wales, the Netherlands and Germany separately or as a package. The subscription covers
- Xpect Data – Generation life tables
- Xpect Indices
- Xpect Forward Curves
For what countries do you offer Xpect Data and Indices?
Xpect Data and Indices are currently available for England & Wales (considered one region), the Netherlands and Germany
What is the difference between Xpect Data, Xpect Indices and Xpect Forward Curves?
Xpect Data delivers monthly updated Generation Life Tables. Xpect Indices are based on Xpect Data. Xpect Indices are calculated for public and customized portfolios. Xpect Forward Curves show expected and simulated runs of the Xpect Cohort Indices.
What data does Xpect use?
Xpect uses Office of National Statistics (ONS) data for England & Wales, Centraal Bureau voor de Statistiek (CBS) data for the Netherlands and Statistisches Bundesamt Deutschland (destatis) data in Germany. In addition, proprietary data sources are used in Germany.
What method does Xpect use to calculate modeled values of the generation life table?
Xpect uses realized data for each cohort until the existing age and employs the Lee Carter method to model monthly qx parameters for future ages per cohort.
Why does Xpect use the Lee-Carter instead of the CBD model?
Xpect uses market-standard models that have been proven by back-testing and decided to use Lee-Carter model due to the high profile in the market. This model is used to calculate the future mortality rates (qx) to generate complete generation life tables. The modelled qx-values are used for the Xpect Forward Curve projection. These are indicative values to price Xpect-linked longevity products. Market participants will use their own models to assess future mortality rates.
Is there a model risk associated with Xpect?
Xpect uses the Lee-Carter model for modeling future mortality qx values. This model is a public model and not a proprietary Deutsche Börse model. The model risk arises if the model does not describe reality correctly in the future. In view of the fact that prediction of future mortality trends is still uncertain, any model that is developed on the basis of past experience has a model risk.
How great is the basis risk of using Xpect?
The basis risk really depends on the portfolio you are looking at. Basis risk is defined as a situation where the mortality of the portfolio is significantly different from the mortality of the population. Xpect already incorporates mortality trend improvements from the last 30 years in the modeling of future parameters. Nevertheless, resent analysis show that different socio-economic classes will have different mortality trends in the future. Xpect is very interested in obtaining specific portfolio or socio-demographic group related parameters in order to calculate sub-group Xpect Data and Indices. Deutsche Börse has already analyzed the impact of socio-demographic parameters of longevity per age and cohort in Germany and the Netherlands. However it needs to be kept in mind, that any reduction in basis risk, that would usually result from customization, has a trade-off on the liquidity side and will make an index less tradable than a standard population index. From Deutsche Börse’s point of view, the basis risk does not outweigh the benefits of a standardized approach which is highly cost-efficient, a liquid investment and hence a flexible hedging strategy for longevity risk management.
Does Xpect replace my actuarial tables?
No, Xpect does not replace or compete with actuarial tables. Xpect was developed to assess longevity risks so that they can be transferred to the capital market with the aid of various instruments. Xpect serves as a parametric underlying and benchmark that is standardized and allows all market participants to base their longevity risk expectations on similar data levels. Expectations about the future longevity trend and changes should not be influenced by different data sources, but rather by individual research and opinions.
Will Deutsche Börse guarantee to calculate Xpect Indices for several decades?
If Xpect Indices are used as underlyings for longevity products, Deutsche Börse is committed to calculate and distribute the Xpect Indices for as long as is possible and sensible. If Deutsche Börse is for any reason unable to continue providing Xpect Indices, it will provide all necessary information so that interested parties can perform their own calculations of Xpect Indices.
Why do you calculate longevity risk on a monthly basis?
Xpect Data and Indices are provided monthly for the Netherlands, Germany and for England & Wales. In view of changes in qx and ex during the year – for example, ex changes up to 4 months p.a. for specific cohorts – Deutsche Börse decided to calculate Xpect on an intra-year basis. When using Xpect Indices as an underlying for products designed to transfer longevity risk, frequent updates of the underlying are essential. Additionally monthly updates are important for collateral management.
How can counterparty risk be managed for index-based longevity transactions?
For longevity transactions with maturities of 10 years and longer, counterparty risk needs to be managed carefully. To reduce counterparty risk, it is important to collateralize the transactions. Deutsche Börse offers established collateral management solutions that can be used for longevity products as well.