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Joint and survivor annuity valuation with a bivariate reinforced urn process

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  • Souto Arias, Luis A.
  • Cirillo, Pasquale

Abstract

We introduce a novel way of modeling the dependence of coupled lifetimes, for the pricing of joint and survivor annuities. Using a well-known Canadian data set, our results are analyzed and compared with the existing literature, mainly relying on copulas. Based on urn processes and a one-factor construction, the proposed model is able to improve its performances over time, in line with the machine learning paradigm, and it also allows for the use of experts' judgements, to complement the empirical data.

Suggested Citation

  • Souto Arias, Luis A. & Cirillo, Pasquale, 2021. "Joint and survivor annuity valuation with a bivariate reinforced urn process," Insurance: Mathematics and Economics, Elsevier, vol. 99(C), pages 174-189.
    • Handle: RePEc:eee:insuma:v:99:y:2021:i:c:p:174-189
    DOI: 10.1016/j.insmatheco.2021.04.004
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    References listed on IDEAS

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    More about this item

    Keywords

    Annuity; Bivariate survival function; Reinforced urn process; Bayesian nonparametrics; Right-censoring;
    All these keywords.

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications

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