Multivariate risk-neutral pricing of reverse mortgages under the Bayesian framework

Jackie Li, Atsuyuki Kogure, Jia Liu

Research output: Contribution to journalArticleResearchpeer-review

7 Citations (Scopus)


In this paper, we suggest a Bayesian multivariate approach for pricing a reverse mortgage, allowing for house price risk, interest rate risk and longevity risk. We adopt the principle of maximum entropy in risk-neutralisation of these three risk components simultaneously. Our numerical results based on Australian data suggest that a reverse mortgage would be financially sustainable under the current financial environment and the model settings and assumptions.

Original languageEnglish
Article number11
Number of pages12
Issue number1
Publication statusPublished - 2019
Externally publishedYes


  • Bayesian modelling
  • House price risk
  • Interest rate risk
  • Longevity risk
  • Principle of maximum entropy
  • Reverse mortgage
  • Risk-neutralisation

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