Centro de Documentacion de Fundación MAPFRE - Modeling multicountry longevity risk with mortality dependence : a Lévy subordinated hierarchical archimedean copulas approach

MAP20170015130

Modeling multicountry longevity risk with mortality dependence : a Lévy subordinated hierarchical archimedean copulas approach / Wenjun Zhu, Ken Seng Tan, Chou-Wen Wang

Sumario: This article proposes a new copula model known as the L¿evy subordinated hierarchical Archimedean copulas (LSHAC) for multicountry mortality dependence modeling. To the best of our knowledge, this is the first article to apply the LSHAC model to mortality studies. Through an extensive empirical analysis on modeling mortality experiences of 13 countries, we demonstrate that the LSHAC model, which has the advantage of capturing the geographical structure of mortality data, yields better fit, compared to the elliptical copulas. In addition, the proposed LSHAC model generates out-of-sample forecasts with smaller standard deviations, when compared to other benchmark copula models. The LSHAC model also confirms that there is an association between geographical locations and dependence of the overall mortality improvement. These results yield new insights into future longevity risk management. Finally, the model is used to price a hypothetical survival index swap written on a weighted mortality index. The results highlight the importance of dependence modeling in managing longevity risk and reducing population basis risk.

En: The Journal of risk and insurance. - Nueva York : The American Risk and Insurance Association, 1964- = ISSN 0022-4367. - 03/04/2017 Volumen 84 Número S1 - abril 2017 , p. 477-493

1. Gerencia de riesgos . 2. Longevidad . 3. Modelización mediante cópulas . 4. Cálculo actuarial . I. Título.