QxX Index Values for May, 2008:
QxX.LS: 45,849
5yr swap fixed spread: 400 bps
10yr swap fixed spread: 500 bps

For information on a recent mortality study produced by the QxX Index data provider, AVS, please refer to the Recent News section.

The Documentation section of QxX-Index.com includes Index Rules updated as of April 2008. The changes in the rules are not expected to have a material impact on the calculation of the Index. However, a copy of the rules as they were written prior to these revisions is available here for comparison, and parties should make their own assessment of the impact to the Index.

QxX

QxX is designed to allow market participants to measure, manage, and trade exposure to longevity and mortality risks in a standardized, transparent, and real-time manner

QxX.LS, the first in an expected series of indices, is a representative sample of the US senior insured population over the age of 65. The initial index references a pool of 46,290 de-identified lives

  • Reference pool consists of a rules-based set of lives, medically underwritten by AVS Underwriting, LLC
  • Published monthly, providing real-time mortality information
  • Mortality tracked by independent, third-party agent, based on the Social Security Death Index
  • Indices will roll on an annual basis, providing a continually updated reference pool, capturing market evolution and underwriting trends

Index computation will be subject to a set of transparent rules under the supervision of a board that includes outside and independent directors and subject to periodic third-party verification

QxX.LS

QxX.LS index swaps are designed to allow market participants to hedge or gain exposure to longevity and mortality risks, providing reliable, real-time pricing information and execution

  • “Fixed Receiver” sells mortality protection and is “long” mortality risk – receives a spread and makes mortality-contingent payments
  • “Fixed Payer” buys mortality protection and is “short” mortality risk / exposed to longevity risk – pays a spread and receives contingent payments
  • Spread to represent market-implied mortality of the reference pool
  • Net cashflows exchanged, representing the difference between the spread and the realized mortality
  • Swaps will trade with a defined term profile – swap maturities will be certain at the outset of each trade

Defined Terms

Longevity and mortality are the risks that realized lifespan differs from expected lifespan, creating an economic consequence, often a price change in an asset or liability

Holders of mortality risk -- typically institutions such as insurance carriers and reinsurers -- are economically exposed to a decrease in the lifespan of a pool of individuals

Holders of longevity risk -- pension funds, annuity writers, the social security trust fund or life settlement investors -- are exposed to the increase in the lifespan of a pool of individuals