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Forward mortality and other vital rates -- Are they the way forward?

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  • Norberg, Ragnar
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    Abstract

    This paper presents a comparative study of stochastic interest and stochastic mortality showing that, despite a virtual similarity, the two concepts are fundamentally different. The notion of forward mortality rate, fetched from finance and now the latest thing in actuarial science, is predicted to soon go out of fashion. Trying it on, it does not fill the measurements of a well-made theoretical concept: there is an element of arbitrariness in its very definition, it disobeys certain self-evident parity requirements, and it fails to generalize to more complex models. It is concluded that forward rate modeling, while passable in the context of interest, is not the way forward in the context of mortality and more general life history analysis.

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    Bibliographic Info

    Article provided by Elsevier in its journal Insurance: Mathematics and Economics.

    Volume (Year): 47 (2010)
    Issue (Month): 2 (October)
    Pages: 105-112

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    Handle: RePEc:eee:insuma:v:47:y:2010:i:2:p:105-112

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    Web page: http://www.elsevier.com/locate/inca/505554

    Related research

    Keywords: Stochastic interest Stochastic mortality Credit risk Rates vs. intensities Multi-state life insurance models;

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    Cited by:
    1. Boualem Djehiche & Bj\"orn L\"ofdahl, 2014. "Risk aggregation and stochastic claims reserving in disability insurance," Papers, arXiv.org 1401.3589, arXiv.org, revised Aug 2014.
    2. Stefan Tappe & Stefan Weber, 2014. "Stochastic mortality models: an infinite-dimensional approach," Finance and Stochastics, Springer, Springer, vol. 18(1), pages 209-248, January.
    3. Buchardt, Kristian, 2014. "Dependent interest and transition rates in life insurance," Insurance: Mathematics and Economics, Elsevier, Elsevier, vol. 55(C), pages 167-179.

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