Centro de Documentacion de Fundación MAPFRE - Testing for a unit root in Lee-Carter mortality model

MAP20170030454

Testing for a unit root in Lee-Carter mortality model / Xuan Leng, Liang Peng

21 p.

Sumario: Motivated by a recent discovery that the two-step inference for the LeeCarter mortality model may be inconsistent when the mortality index does not follow from a nearly integrated AR(1) process, we propose a test for a unit root in a LeeCartermodelwith an AR(p) process for themortality index. Although testing for a unit root has been studied extensively in econometrics, the method and asymptotic results developed in this paper are unconventional. Unlike a blind application of existing R packages for implementing the two-step inference procedure in Lee and Carter (1992) to the U.S. mortality rate data, the proposed test rejects the null hypothesis that the mortality index follows from a unit root AR(1) process, which calls for serious attention on using the future mortality projections based on the LeeCarter model in policy making, pricing annuities and hedging longevity risk. A simulation study is conducted to examine the finite sample behavior of the proposed test too

En: Astin bulletin. - Belgium : ASTIN and AFIR Sections of the International Actuarial Association = ISSN 0515-0361. - 01/09/2017 Volumen 47 Número 3 - septiembre 2017 , p. 715-735

1. Mortalidad . 2. Longevidad . 3. Índices . 4. Modelos actuariales . 5. Modelos analíticos . I. Peng, Liang . II. Title.