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Affine Stochastic Mortality

24 Pages Posted: 11 Dec 2004  

David Schrager

ING Group; University of Amsterdam

Date Written: October 22, 2004

Abstract

We propose a new model for stochastic mortality. The model is based on the literature on affine term structure models. It satisfies three important requirements for application in practice: analytical tractibility, clear interpretation of the factors and compatibility with financial option pricing models. We test the model fit using data on Dutch mortality rates. Furthermore we discuss the specification of a market price of mortality risk and apply the model to the pricing of a Guaranteed Annuity Option and the calculation of required Economic Capital for mortality risk.

Keywords: Stochastic Mortality, Affine Models, Mortality Laws, Longevity Risk, Market Price of Mortality

JEL Classification: C33, G12, G13, J11

Suggested Citation

Schrager, David, Affine Stochastic Mortality (October 22, 2004). Available at SSRN: https://ssrn.com/abstract=630404 or http://dx.doi.org/10.2139/ssrn.630404

David Schrager (Contact Author)

ING Group ( email )

Amsterdam
Netherlands

University of Amsterdam ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands
+31-205254125 (Phone)

HOME PAGE: http://www.fee.uva.nl/ke/schrager

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