IDEAS home Printed from https://ideas.repec.org/a/ctl/louvde/v89y2023i3p483-512.html
   My bibliography  Save this article

Accounting for COVID-19-type shocks in mortality modeling: a comparative study

Author

Listed:
  • Simon SCHNÃœRCH

    (Department of Financial Mathematics, Fraunhofer Institute for Industrial Mathematics ITWM and Department of Mathematics, University of Kaiserslautern)

  • Torsten KLEINOW

    (Department of Actuarial Mathematics and Statistics and the Maxwell Institute for Mathematical Sciences, School of Mathematical and Computer Sciences, Heriot-Watt University)

  • Andreas WAGNER

    (Department of Financial Mathematics, Fraunhofer Institute for Industrial Mathematics ITWM)

Abstract

Mortality shocks such as the one induced by the COVID-19 pandemic have substantial impact on mortality models. We describe how to deal with them in the period effect of the Lee–Carter model. The main idea is to not rely on the usual normal distribution assumption as it is not always justified. We consider a mixture distribution model based on the peaks-over-threshold method, a jump model, and a regime switching model and introduce a modified calibration procedure to account for the fact that varying amounts of data are necessary for calibrating different parts of these models. We perform an extensive empirical study for nine European countries, comparing the models with respect to their parameters, quality of fit, and forecasting performance. Moreover, we define five exemplary scenarios regarding the future development of pandemic-related mortality. As a result of our evaluations, we recommend the peaks-over-threshold approach for applications with a possibility of extreme mortality events.

Suggested Citation

  • Simon SCHNÃœRCH & Torsten KLEINOW & Andreas WAGNER, 2023. "Accounting for COVID-19-type shocks in mortality modeling: a comparative study," JODE - Journal of Demographic Economics, Cambridge University Press, vol. 89(3), pages 483-512, September.
    • Handle: RePEc:ctl:louvde:v:89:y:2023:i:3:p:483-512
    DOI: 10.1017/dem.2023.9
    as

    Download full text from publisher

    File URL: https://doi.org/10.1017/dem.2023.9
    Download Restriction: no
    File URL: https://libkey.io/10.1017/dem.2023.9?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Şule Şahin & Selin Özen, 2024. "A Quantitative Comparison of Mortality Models with Jumps: Pre- and Post-COVID Insights on Insurance Pricing," Risks, MDPI, vol. 12(3), pages 1-24, March.

    More about this item

    Keywords

    COVID-19; Lee-Carter model; Mortality forecasting; Mortality Modelling; Mortality shocks;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ctl:louvde:v:89:y:2023:i:3:p:483-512. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sebastien SCHILLINGS (email available below). General contact details of provider: https://edirc.repec.org/data/iruclbe.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.