Lee-Carter goes risk-neutral: an application to the Italian annuity market
Biffis, E. & Denuit, M. (2005). Lee-Carter goes risk-neutral: an application to the Italian annuity market (Actuarial Research Paper No. 166). London, UK: Faculty of Actuarial Science & Insurance, City University London.
Abstract
We consider a class of stochastic intensities of mortality that generalizes the model proposed by Lee and Carter (1992), allowing general diffusions to drive the mortality time-trend. We analyze the stability of such class of intensities under measure changes and show how a risk-neutral version of the generalized Lee-Carter model can be employed for fair valuation purposes. We provide an example of model calibration based on the Italian annuity market.
| Publication Type: | Monograph (Working Paper) |
|---|---|
| Publisher Keywords: | stochastic mortality, Lee-Carter model, mortality projections, fair valuation, longevity risk |
| Subjects: | H Social Sciences > HG Finance |
| Departments: | Bayes Business School > Actuarial Science & Insurance > Actuarial Research Reports |
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