Modified Logistic Model for Mortality Forecasting and the Application of Mortality-Linked Securities
AbstractThis article proposes the modified logistic mortality model as a potential moderation of current models. The fitting and forecasting effects of the proposed modified logistic mortality model are efficient for the mortality data of the United States, Japan, England and Wales, and the modified logistic model provides the best forecasting for persons older than age 30 years under MAPE criterion. In addition, this study considers how to use longevity bonds to manage longevity risk. We apply the proposed modified logistic mortality model to price the bond, and to improve the attractiveness of that bond, we design it to encompass more than one tranche, according to the concept of collateral debt obligation. This design offers investors more choices pertaining to their different risk preferences.
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Bibliographic InfoArticle provided by De Gruyter in its journal Asia-Pacific Journal of Risk and Insurance.
Volume (Year): 6 (2012)
Issue (Month): 1 (February)
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Web page: http://www.degruyter.com
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