Survivor Bond

DEFINITION of 'Survivor Bond'

A type of bond whose future coupons are based on the percentage of a stated population group who are still alive - the survivors, in other words - on the future coupon payment dates. As mortality increases and survivors of the group decrease over time, coupon payments decline until they eventually reach zero. Survivor bonds are used by annuity providers and pension plan managers to hedge aggregate longevity risk.

BREAKING DOWN 'Survivor Bond'

Longevity risk refers to the risk of loss sustained from an unanticipated reduction in mortality rates and a corresponding increase in longevity. While advances in health care and medicine have led to sustained increases in life expectancy over the years, aging populations are putting severe financial pressure on government pension plans around the world. Survivor bonds help annuity providers and pension plans hedge this risk, since these bonds are ideal for matching their liabilities in the presence of longevity risk.

RELATED TERMS
  1. Longevity Derivatives

    A class of securities that provides a hedge against parties that ...
  2. Current Coupon Bond

    A bond with a coupon rate that is within 0.5\% of the current ...
  3. Zero-Coupon Bond

    A debt security that doesn't pay interest (a coupon) but is traded ...
  4. Step-Up Bond

    A bond that pays an initial coupon rate for the first period, ...
  5. Variable Rate Demand Bond

    A bond with floating coupon payments that are adjusted at specific ...
  6. Income Bond

    A type of debt security in which only the face value of the bond ...
Related Articles
  1. Taxes

    Estate Planning for a Surviving Spouse

    Estate planning for surviving spouses can be difficult for a number of reasons, so it's important to have good support and financial advice.
  2. Bonds & Fixed Income

    Advanced Bond Concepts: Bond Pricing

    It is important for prospective bond buyers to know how to determine the price of a bond because it will indicate the yield received should the bond be purchased. In this section, we will run ...
  3. Investing Basics

    What is a "Coupon"?

    In the financial world, “coupon” represents the interest rate on a bond.
  4. Budgeting

    Coupon Shopping: Clip Your Way To Savings

    Use coupons strategically to score big savings on everyday purchases.
  5. Retirement

    How do Survivor Benefits Work?

    With nearly 5 million windows and widowers receiving monthly benefits from their deceased spouse’s earnings, survivor benefits represent a powerful component of the Social Security program. Rob ...
  6. Personal Finance

    Ripped Off By A Store Coupon? Try These Tips

    Not all coupons are real. We list some tips on how to tell the difference between a fake and a genuine coupon.
  7. Bonds & Fixed Income

    Using Excel PV Function to compute Bonds PV

    To determine the value of a bond today - for a fixed principal (par value) to be repaid in the future at any predetermined time - we can use an Excel spreadsheet.
  8. Budgeting

    6 Sneaky Ways Coupons Make You Spend More

    If you're hoping to save money by using coupons, watch out for sellers' strategies.
  9. Entrepreneurship

    The Pros & Cons Of Using Coupons For Your Business

    Coupons can drive business to your store – you just need to make sure it's profitable business. Here are strategies that work.
  10. Investing Basics

    How Advisors Can Help Address Longevity Risk

    Financial advisors can help clients manage longevity risk with a variety of strategies and products. Here's a look.
RELATED FAQS
  1. How do debit spreads impact the trading of options?

    Find out what it means when a bond has a coupon rate of zero and how a bond's coupon rate and par value affect its selling ... Read Answer >>
  2. How does a bond's coupon rate affect its price?

    Find out how a bond's coupon rate influences its price, including the role of government-dictated interest rates and the ... Read Answer >>
  3. How does a bond's coupon interest rate affect its price?

    Find out why the difference between the coupon interest rate on a bond and prevailing market interest rates has a large impact ... Read Answer >>
  4. What is the most common solvency ratios used in fundamental analysis?

    Learn about the difference between a bond's coupon rate and its yield rate, how the coupon rate influences market price and ... Read Answer >>
  5. How does the money from the interest on my bond get to me?

    When you buy a regular coupon bond, you are entitled to a coupon, which is typically paid at regular intervals, and the face ... Read Answer >>
  6. Why do zero coupon bonds tend to be volatile?

    Learn why the price of zero coupon bonds is volatile and why some investors may wish to hold them in retirement accounts ... Read Answer >>
Hot Definitions
  1. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  2. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  3. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  4. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  5. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  6. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
Trading Center