Modeling the Risk in Mortality Projections

• 成果类型: Article; Early Access
• 署名作者: Zhu, Nan; Bauer, Daniel
• 署名单位: Pennsylvania Commonwealth System of Higher Education (PCSHE); Pennsylvania State University; Pennsylvania State University - University Park; University of Wisconsin System; University of Wisconsin Madison; University of Wisconsin System; University of Wisconsin Madison
• 刊物名称: OPERATIONS RESEARCH
• ISSN/ISSBN: 0030-364X
• DOI: 10.1287/opre.2021.2255
• 发表日期: 2022
• 页码: 1-16
• 关键词: longevity risk; term structure; stochastic volatility; exact simulation; valuation; OPTION; forecasts

摘要

This paper presents and applies models for the valuation and management of mortality-contingent exposures. Such exposures include insurance and pension benefits, as well as novel mortality-linked securities traded in financial markets. Unlike conventional approaches to modeling mortality, we consider the stochastic evolution of mortality projections rather than realized mortality rates. Relying on a time series of age-specific mortality forecasts, we develop a set of stochastic models that-unlike conventional mortality models-capture the evolution of mortality forecasts over the past 50 years. In particular, the dynamics of our models reflect the substantial observed variability of long-term projections and are therefore particularly well-suited for financial applications where long-term demographic uncertainty is relevant.