Lee-Carter Goes Risk-Neutral
19 Pages Posted: 16 Nov 2005 Last revised: 2 Jan 2008
Date Written: June 26, 2006
Abstract
We consider a class of stochastic intensities of mortality that generalizes the model proposed by Lee and Carter (1992), allowing general diffusions to drive the mortality time-trend. We analyze the stability of such class of intensities under measure changes and show how a risk-neutral version of the generalized Lee-Carter model can be employed for fair valuation purposes. We provide an example of model calibration based on the Italian annuity market.
Keywords: stochastic mortality, Lee-Carter model, mortality projections, fair valuation, longevity risk
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Securitization of Catastrophe Mortality Risks
By Yijia Lin and Samuel H. Cox
-
Mortality Derivatives and the Option to Annuitize
By Moshe A. Milevsky and David Promislow
-
Affine Processes for Dynamic Mortality and Actuarial Valuations
-
By Andrew J. G. Cairns, David P. Blake, ...
-
Natural Hedging of Life and Annuity Mortality Risks
By Samuel H. Cox and Yijia Lin
-
Modelling and Management of Mortality Risk: A Review
By Andrew J. G. Cairns, David P. Blake, ...
-
Mortality Density Forecasts: An Analysis of Six Stochastic Mortality Models
By Andrew J. G. Cairns, David P. Blake, ...