Joint and Survivor Annuity Valuation with a Bivariate Reinforced Urn Process

23 Pages Posted: 2 Sep 2020 Last revised: 22 Apr 2021

Date Written: July 24, 2020

Abstract

We introduce a novel way of modeling the dependence of coupled lifetimes, for the pricing of joint and survivor annuities. Using a well-known Canadian data set, our results are analysed and compared with the existing literature, mainly relying on copulas. Based on urn processes and a one-factor construction, the proposed model is able to improve its performances over time, in line with the machine learning paradigm, and it also allows for the use of experts’ judgements, to complement the empirical data.

Keywords: urn process, joint distribution, annuity, mortality

JEL Classification: C11, G22, J32

Suggested Citation

Souto Arias, Luis Antonio and Cirillo, Pasquale, Joint and Survivor Annuity Valuation with a Bivariate Reinforced Urn Process (July 24, 2020). Insurance: Mathematics and Economics, Vol. 99, 2021, 174-189., Available at SSRN: https://ssrn.com/abstract=3660087 or http://dx.doi.org/10.2139/ssrn.3660087

Luis Antonio Souto Arias

Utrecht University ( email )

Budapestlaan 6
Utrecht, Utrecht 3584 CD
Netherlands

Pasquale Cirillo (Contact Author)

ZHAW School of Management and Law ( email )

St.-Georgen-Platz 2
Winterthur, 8401
Switzerland

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