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A Family of Mortality Jump Models Applied to US Data

A Family of Mortality Jump Models Applied to US Data doi 10.1515/apjri-2013-0015 APJRI 2014; 8(1): 105–121 Featured Article Hua Chen* A Family of Mortality Jump Models Applied to US Data Abstract: Mortality models are fundamental to quantify mortality/longevity risks and provide the basis of pricing and reserving. In this article, we consider a family of mortality jump models and propose a new generalized Lee–Carter model with asymmetric double exponential jumps. It is asymmetric in terms of both time periods of impact and frequency/severity profiles between adverse mortality jumps and longevity jumps. It is mathematically tractable and eco- nomically intuitive. It degenerates to a transitory exponential jump model when fitting the US mortality data and is the best fit compared with other jump models. Keywords: mortality models, asymmetric jumps *Corresponding author: Hua Chen, Department of Risk, Insurance and Healthcare Management, The Fox School of Business, Temple University, Philadelphia, PA 19122, USA, E-mail: hchen@temple.edu 1 Introduction Mortality risk management is fundamental to the life insurance and pension industries. Mortality tables only provide a starting point of risk analysis, because they do not consider the mortality evolvement over time. Stochastic mortality models are, therefore, essential in order to quantify mortality/longevity risks and provide the basis of pricing and hedging. In order to http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Asia-Pacific Journal of Risk and Insurance de Gruyter

A Family of Mortality Jump Models Applied to US Data

Chen, Hua
Asia-Pacific Journal of Risk and Insurance , Volume 8 (1) – Dec 3, 2013
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de Gruyter
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Copyright © 2011–2019 by Walter de Gruyter GmbH
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2153-3792
DOI
10.1515/apjri-2013-0015
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Abstract

doi 10.1515/apjri-2013-0015 APJRI 2014; 8(1): 105–121 Featured Article Hua Chen* A Family of Mortality Jump Models Applied to US Data Abstract: Mortality models are fundamental to quantify mortality/longevity risks and provide the basis of pricing and reserving. In this article, we consider a family of mortality jump models and propose a new generalized Lee–Carter model with asymmetric double exponential jumps. It is asymmetric in terms of both time periods of impact and frequency/severity profiles between adverse mortality jumps and longevity jumps. It is mathematically tractable and eco- nomically intuitive. It degenerates to a transitory exponential jump model when fitting the US mortality data and is the best fit compared with other jump models. Keywords: mortality models, asymmetric jumps *Corresponding author: Hua Chen, Department of Risk, Insurance and Healthcare Management, The Fox School of Business, Temple University, Philadelphia, PA 19122, USA, E-mail: hchen@temple.edu 1 Introduction Mortality risk management is fundamental to the life insurance and pension industries. Mortality tables only provide a starting point of risk analysis, because they do not consider the mortality evolvement over time. Stochastic mortality models are, therefore, essential in order to quantify mortality/longevity risks and provide the basis of pricing and hedging. In order to

Journal

Asia-Pacific Journal of Risk and Insurance – de Gruyter

Published: Dec 3, 2013

Keywords: mortality models

References

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