Abstract: Extreme mortality swaps are contracts of regularly exchanging a series of cash flows between life insurance companies and counterparty based on the difference between the real mortality and the expected mortality of the target population. This paper presents the market development of extreme mortality swaps and analyzes the operational mechanism of extreme mortality swaps. By employing the method of Wang transform, it derives a pricing model of extreme mortality swaps, with which the sameness and difference between extreme mortality swaps and longevity swaps are compared and studied.

Key words: extreme mortality risks; extreme mortality swap; operational mechanism; Wang Transform