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Indemnity swap

\ɪnˈdɛmnəti\ \swɑp\

An indemnity swap is the term for a longevity swap where the ‘actual’ mortality rates are determined by the experience of a specified population.

This type of swap should perfectly hedge the idiosyncratic risk, the basis risk and the trend risk in the specified population, although it is likely to be less flexible and contractually more restrictive. Such swaps are usually structured to cover the underlying population until they all pass away.

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