Centro de Documentacion de Fundación MAPFRE - Correlated age-specific mortality model: an application to annuity portfolio management

MAP20220007955

Correlated age-specific mortality model: an application to annuity portfolio management / Tzuling Lin, Chou-Wen Wang, Cary Chi-Liang Tsai

Sumario: This article models the dynamics of age-specific incremental mortality as a stochastic process in which the drift rate can be simply and effectively modeled as the average annual improvement rate of a group time trend for all ages and the distribution of residuals can be fitted by one of the Gaussian distribution and four non-Gaussian distributions (Student t, jump diffusion, variance gamma, and normal inverse Gaussian). We use the one-factor copula model with six distributions for the factors (normalnormal, normalStudent t, Student tnormal, Student tStudent t, skewed tnormal, and skewed tStudent t) to capture the inter-age mortality dependence. We then construct three annuity portfolios (Barbell, Ladder, and Bullet) with equal portfolio value (total net single premium) and portfolio mortality duration but different portfolio mortality convexities. Finally, we apply our model to managing longevity risk by an approximation to the change in the portfolio value in response to a proportional or constant change in the force of mortality, and by estimating Value at Risk for the three annuity portfolios

En: European Actuarial Journal. - Cham, Switzerland : Springer Nature Switzerland AG, 2021-2022. - 06/12/2021 Volúmen 11 - Número 2 - diciembre 2021 , p. 413-440

1. Renta vitalicia . 2. Mortalidad . I. Wang, Chou-Wen . II. Tsai, Chi-Liang . III. Título.