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MODELING LONGEVITY RISK WITH GENERALIZED DYNAMIC FACTOR MODELS AND VINE-COPULAE

Published online by Cambridge University Press:  11 November 2015

Helena Chuliá ,
Montserrat Guillén  and
Jorge M. Uribe
Helena Chuliá
Affiliation:
Universitat de Barcelona, Department of Econometrics and Riskcenter-IREA, Spain E-Mail: hchulia@ub.edu
Montserrat Guillén
Affiliation:
Department of Econometrics and Riskcenter-IREA, Universitat de Barcelona, Spain E-Mail: mgillen@ub.edu
Jorge M. Uribe*
Affiliation:
Department of Economics, Universidad del Valle, Colombia
*
E-Mail: jorge.uribe@correounivalle.edu.co
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Abstract

We present a methodology to forecast mortality rates and estimate longevity and mortality risks. The methodology uses generalized dynamic factor models fitted to the differences in the log-mortality rates. We compare their prediction performance with that of models previously described in the literature, including the traditional static factor model fitted to log-mortality rates. We also construct risk measures using vine-copula simulations, which take into account the dependence between the idiosyncratic components of the mortality rates. The methodology is applied to forecast mortality rates for a population portfolio for the UK and to estimate longevity and mortality risks.

Keywords

Longevitymortality forecastingfactor modelsvine-copulaevalue-at-risk
Type
Research Article
Information
ASTIN Bulletin: The Journal of the IAA , Volume 46 , Issue 1 , January 2016 , pp. 165 - 190
Copyright
Copyright © Astin Bulletin 2015 

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