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Mortality risk via affine stochastic intensities: calibration and empirical relevance

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  • LUCIANO, Elisa
  • VIGNA, Elena

Abstract

In this paper, we address the mortality risk of individuals and adopt parsimonious time- homogeneous a±ne processes for their mortality intensities. We calibrate the models to different generations in the UK population and investigate their empirical appropriateness. We find that, in spite of their simplicity, non mean reverting processes with deterministic part that increases exponentially - which generalize the Gompertz law - seem to be appropriate descriptors of human mortality. The proposed models prove to fulfill most of the properties that a good model for stochastic mortality should have. Empirical results show that the generalization is worth explor- ing. Indeed, the variability of number of deaths may increase considerably due to the randomness of the mortality intensity. We show that the models are suitable for mortality forecasting and mortality trend assessment.

Suggested Citation

  • LUCIANO, Elisa & VIGNA, Elena, 2008. "Mortality risk via affine stochastic intensities: calibration and empirical relevance," MPRA Paper 59627, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:59627
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    stochastic mortality; a±ne processes; survival probability modeling; survival proba- bility calibration.;
    All these keywords.

    JEL classification:

    • 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

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