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. Coupon Bond

    A debt obligation with coupons attached that represent semiannual ...
  2. Coupon Rate

    The yield paid by a fixed income security. A fixed income security's ...
  3. Short Coupon

    A payment made on a bond within a shorter time interval than ...
  4. Zero-Coupon Bond

    A debt security that doesn't pay interest (a coupon) but is traded ...
  5. Ex Coupon

    A bond or preferred stock that does not include the interest ...
  6. Coupon

    The annual interest rate paid on a bond, expressed as a percentage ...
Related Articles
  1. Personal Finance

    Coupon Shopping: Clip Your Way To Savings

    Use coupons strategically to score big savings on everyday purchases.
  2. Investing

    How Does A Bond’s Coupon Interest Rate Affect Its Price?

    All bonds come with a coupon interest rate, which is the fixed annual interest a bond pays.
  3. Financial Advisor

    The Social Security Blackout Period

    Surviving spouses may experience a blackout period - during which they cannot collect social security benefits - between the time their youngest child turns 16 and they turn 60, with some exceptions. ...
  4. Financial Advisor

    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.
  5. Investing

    Comparing Yield To Maturity And The Coupon Rate

    Investors base investing decisions and strategies on yield to maturity more so than coupon rates.
  6. Personal Finance

    6 Sneaky Ways Coupons Make You Spend More

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

    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.
  8. Personal Finance

    6 Tricks To Make Coupons Work For You

    Use these strategies to counteract the stores' and manufacturers' coupon tactics and come out ahead.
  9. Financial Advisor

    Longevity Annuities: A Salve for Volatility?

    Recent market volatility has led some investors to take a second look at longevity annuities. Here's when they are a good idea for clients.
  10. Financial Advisor

    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 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 >>
  3. What is the difference between a bond's yield rate and its coupon rate?

    Learn why bond coupon payments, which are a series of fixed payments made to a bondholder throughout the life of the bond, ... Read Answer >>
  4. How can I calculate a bond's coupon rate in Excel?

    Find out how to use Microsoft Excel to calculate the coupon rate of a bond using its par value and the amount and frequency ... Read Answer >>
  5. How do interest rates affect a bond's coupon rate?

    Find out how the changes in the national interest rate affect the coupon rates of newly issued bonds and why coupon rates ... Read Answer >>
Hot Definitions
  1. Treynor Ratio

    A ratio developed by Jack Treynor that measures returns earned in excess of that which could have been earned on a riskless ...
  2. Buyback

    The repurchase of outstanding shares (repurchase) by a company in order to reduce the number of shares on the market. Companies ...
  3. Tax Refund

    A tax refund is a refund on taxes paid to an individual or household when the actual tax liability is less than the amount ...
  4. Gross Domestic Product - GDP

    The monetary value of all the finished goods and services produced within a country's borders in a specific time period, ...
  5. Inflation

    The rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of ...
  6. Merchandising

    Merchandising is any act of promoting goods or services for retail sale, including marketing strategies, display design and ...
Trading Center