Types of dependence and time-dependent association between two lifetimes in single parameter copula models

Spreeuw, J. (2006). Types of dependence and time-dependent association between two lifetimes in single parameter copula models (Report No. Actuarial Research Paper No. 169). London, UK: Faculty of Actuarial Science & Insurance, City University London.

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Abstract

Most publications on modeling insurance contracts on two lives, assuming dependence of the two lifetimes involved, focus on the time of inception of the contract. The dependence between the lifetimes is usually modeled through a copula and the effect of this dependence on the pricing of a joint life policy is measured. This paper investigates the effect of association at the outset on the mortality in the future. The conditional law of mortality of an individual, given his survival and given the life status of the partner is derived. The conditional joint survival distribution of a couple at any duration, given that the two lives are then alive, is also derived. We analyze how the degree of dependence between the two members of a couple varies throughout the duration of a contract. We will do that for (mainly Archimedean) copula models, with one parameter for the degree of dependence. The conditional distributions hence derived provide the basis for the calculation of prospective provisions.

Item Type: Monograph (Working Paper)
Uncontrolled Keywords: Archimedean copulas, multiple life contingencies, aging, valuing policies
Subjects: H Social Sciences > HG Finance
Divisions: Cass Business School > Faculty of Actuarial Science & Insurance > Faculty of Actuarial Science & Insurance Actuarial Research Reports
URI: http://openaccess.city.ac.uk/id/eprint/2301

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