  |
|
|
||||
|
||||
Mortality Regimes and Pricing
Samuel H. Cox University of Manitoba - Asper School of Business Yijia Lin University of Nebraska at Lincoln - Department of Finance Andreas Milidonis University of Cyprus - Department of Public & Business Administration; Manchester Business School - Accounting & Finance November 09, 2009 Abstract: Mortality dynamics are characterized by changes in mortality regimes. This paper describes a Markov regime switching model which incorporates mortality state switches into mortality dynamics. Using the 1901-2005 US population mortality data, we illustrate that regime switching models perform better than well-known models in the literature. Furthermore, we extend the Lee-Carter (1992) model in such a way that the error term of the time-series common factor has distinct mortality regimes with different means and volatilities. Finally, we show how to price mortality securities with this model.
Keywords: Lee-Cater model, regime switching mortality model, mortality-linked securities JEL Classifications: C02, C13, G22, G23 Working Paper SeriesDate posted: November 09, 2009 ; Last revised: November 09, 2009Suggested CitationContact Information
|
|
|||||||||||||||||||||
© 2009 Social Science Electronic Publishing, Inc. All Rights Reserved. Terms of Use Privacy Policy
This page was served by apollo3 in 0.125 seconds.
Download
Facebook
Twitter
Digg
Del.icio.us
CiteULike
