Joint and Survivor Annuity Valuation with a Bivariate Reinforced Urn Process

20 Pages Posted: 2 Sep 2020

See all articles by Luis Souto Arias

Luis Souto Arias

Center for Mathematics and Computer Science (CWI)

Pasquale Cirillo

Delft University of Technology; Delft University of Technology - Delft Institute of Applied Mathematics (DIAM)

Date Written: July 24, 2020

Abstract

Using a Bi-variate Reinforced Urn Process (B-RUP), a novel way of modeling the dependence of coupled lifetimes is introduced, with application to the pricing of joint and survivor annuities. In line with the machine learning paradigm, the model is able to improve its performances over time, but it also allows for the use of a priori information, like for example experts’ judgement, to complement the empirical data. Using a well-known Canadian data set, the performances of the B-RUP are studied and compared with the existing literature.

Keywords: urn process, joint distribution, annuity, mortality

JEL Classification: C11, G22, J32

Suggested Citation

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

Luis Souto Arias

Center for Mathematics and Computer Science (CWI) ( email )

P.O. Box 94079
Amsterdam, NL-1090 GB
Netherlands

Pasquale Cirillo (Contact Author)

Delft University of Technology ( email )

Stevinweg 1
Stevinweg 1
Delft, 2628 CN
Netherlands

Delft University of Technology - Delft Institute of Applied Mathematics (DIAM) ( email )

Mekelweg 4
Delft, Holland 2628
Netherlands

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