2020/09/20 by Ling Wang, Wang, Ling, Mei Choi Chiu +3 · 2 citations
Economics, Econometrics and Finance · Health Professions · Social Sciences · #FOS: Economics and business #Global Health Care Issues #Insurance and Financial Risk Management #Insurance, Mortality, Demography, Risk Management #Mathematical Finance (q-fin.MF) #Risk Management (q-fin.RM)
paper · pdf · doi:10.48550/arxiv.2009.09572
openalex publication_date 2020/09/20 · openalex created_date 2021/05/10 · openalex updated_date 2026/07/28
While abundant empirical studies support the long-range dependence (LRD) of\nmortality rates, the corresponding impact on mortality securities are largely\nunknown due to the lack of appropriate tractable models for valuation and risk\nmanagement purposes. We propose a novel class of Volterra mortality models that\nincorporate LRD into the actuarial valuation, retain tractability, and are\nconsistent with the existing continuous-time affine mortality models. We derive\nthe survival probability in closed-form solution by taking into account of the\nhistorical health records. The flexibility and tractability of the models make\nthem useful in valuing mortality-related products such as death benefits,\nannuities, longevity bonds, and many others, as well as offering optimal\nmean-variance mortality hedging rules. Numerical studies are conducted to\nexamine the effect of incorporating LRD into mortality rates on various\ninsurance products and hedging efficiency.\n