Mortality Regimes and Pricing

By Andreas Milidonis, Yijia Lin, Samuel H. Cox. North American Actuarial Journal, 2011

88 citations recorded by the source corpus.

Abstract Mortality dynamics are characterized by changes in mortality regimes. This paper describes a Markov regime-switching model that incorporates mortality state switches into mortality dynamics. Using the 1901-2005 U.S. population mortality data, we illustrate that regime-switching models can perform better than well-known models in the literature. Furthermore, we extend the 1992 Lee-Carter model in such a way that the time-series common risk factor to all cohorts has distinct mortality regimes with different means and volatilities. Finally, we show how to price mortality securities with this model.

Subfields: Demography, General Health Professions, Management Science and Operations Research

View Paper: https://www.semanticscholar.org/paper/25d5a7e662ab611bfa7d806e2ee64ca0a4c890c2

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In Demography

In General Health Professions

In Management Science and Operations Research

Citations in the corpus

Pricing Standardized Mortality Securitizations: A Two‐Population Model with Transitory Jump Effects (2013, unknown): “Milidonis et al. (2011) estimated a regime-switching model to a U.S. population mortality index.”
Understanding, modelling and managing longevity risk: key issues and main challenges (2012, background): “Changes in the longevity trends are studied in a recent work by Cox et al. (2009), while the specific issue of the early detection of these changes and the risk of false alarms are addressed in El Karoui et al. (2009).”
The New Life Market (2013, unknown): “…Hatzopoulos and Haberman (2009, 2011), Biffis et al. (2010b), Debonneuil (2010), Cox et al. (2010), Yang et al. (2010), D’Amato et al. (2011), Milidonis et al. (2011), Wang et al. (2011a), Zhu and Bauer (2011), Aleksic and Börger (2012) and Hainaut (2012). incorporation of cohort effects;…”
Pricing Mortality Securities with Correlated Mortality Indexes (2011, unknown): “…pricing risks embedded in loan defaults, mortgage refinancing, electricity trading, weather derivatives, catastrophic insurance, and insurance-linked securities (Duffie, 1992; Karatzas and Shreve, 1992; Heston, 1993; Gerber and Shiu, 1996; Cox, Lin, and Wang, 2006; Milidonis, Lin, and Cox, 2011).”