Modeling the Risk in Mortality Projections

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 fifty 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.

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Metadata

Work Title Modeling the Risk in Mortality Projections
Access
Open Access
Creators
  1. Nan Zhu
  2. Daniel Bauer
Keyword
  1. Longevity risk
  2. Mortality risk management
  3. Forward mortality models
  4. Affine models
License In Copyright (Rights Reserved)
Work Type Article
Publisher
  1. Operations Research
Publication Date February 15, 2022
Publisher Identifier (DOI)
  1. https://doi.org/10.1287/opre.2021.2255
Deposited July 25, 2022

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Version 1
published

  • Created
  • Added BauerZhu_ForwMort.pdf
  • Added Creator Nan Zhu
  • Added Creator Daniel Bauer
  • Published
  • Updated Keyword, Publisher Identifier (DOI), Publication Date Show Changes
    Keyword
    • Longevity risk, Mortality risk management, Forward mortality models, Affine models
    Publisher Identifier (DOI)
    • https://doi.org/10.1287/opre.2021.2255
    Publication Date
    • 2022-02-01
    • 2022-02-15