Assessing Longevity Risk in a Portfolio of Life Annuities
25 Pages Posted: 5 Sep 2016 Last revised: 28 Sep 2016
Date Written: September 27, 2016
In this paper we focus on longevity risk when mortality laws are used for the patterns of death description in a population. The notion of longevity risk is strictly linked to parameter uncertainty that suggests the estimation output should be an interval instead of a single value for each parameter. To this aim we first create bootstrapped samples and then, for each cohort in a sample, estimate model parameters. The dynamics of each parameter is then modeled with an autoregressive process. Finally, we simulate future scenarios for yearly probabilities of death and use them in life annuity portfolio pricing.
Keywords: Longevity; Bootstrap; Life annuity; Mortality law
Suggested Citation: Suggested Citation