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Two-variable developments of the n-ages method

Published online by Cambridge University Press:  18 August 2016

Wilfred Perks
Affiliation:
Pearl Assurance Company, Ltd.

Extract

This paper is devoted mainly to the extension of the ‘n-ages method’ of approximation for product-sums to summations in respect of two variables; some uses in valuation work of the formulae developed are indicated and illustrated arithmetically. Hitherto, apart from a special formula devised for the particular purpose of illustrating the possibilities of valuing whole-life assurances by limited payments grouped by years of entry (J.I.A. Vol. LXIV, p. 325), the n-ages method has been confined to one variable.

Type
Research Article
Copyright
Copyright © Institute and Faculty of Actuaries 1946

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References

page 377 note * In view of the various developments of the method, the name ‘n-ages’ has ceased to be appropriate. ‘n-variates’ would be a better name, but, as Elderton indicated (J.I.A. Vol. LXIV, p. 309) and as will further appear from comments in this paper, the method is closely akin to quadrature. Accordingly the suggestion is made that the name be changed to ‘weighted quadrature’. [But see p. 398 where ‘n-point method’ is suggested.–Eds. J.I.A.]

page 380 note * It may assist students to note that each formula represents an n-term ‘pocket’ representation of the full distribution uxy , all the moments of this ‘pocket’ distribution up to the order used in the basis of the formula being identical with those of the full distribution.

page 381 note * Prior to the developments in this paper, R. E. Beard reached formula(11) as an ‘n-ages’ solution of the problem of the group valuation of joint and last survivor annuities on two lives, recently discussed by the Faculty (T.F.A. Vol.XVII, p.39), and obtained close results for various test distributions, but his consideration of the two-variable aspect of the ‘n-ages’ method in the practical field was interrupted by the transfer of his activities outside the life assurance sphere.

page 389 note * Many quadrature formulae can be obtained as special cases of a corresponding ‘n-ages’ formula; for example, Jones's fourth-order formula for Σuxf(x) applied to (the frequencies ux being treated as constant, so that σ2 = ⅓ and β2 = 1.8) produces the quadrature formula correct to the fifth order. See also Whittaker and Robinson, The Calculus of Observations, p. 163, where the special case of Jones's fourth-order formula, when ux is the normal curve, is given as due to A. Berger.

It seems that Tchebycheff, following up a special case by Bronwin, was the originator of the single-variable ‘n-ages’ method, reaching a general solution for an n-term equally weighted formula, correct up to the nth order, including the remainder term (see The Calculus of Finite Differences, by L. M. Milne-Thompson. p. 177). When the distribution ux is rectangular, Tchebycheff's quadrature formulae result and the simple quadrature formulae referred to by Elderton in J.S.S. Vol. II, No. 2, are special approximate cases. The fifth-order Tchebycheff quadrature formula given by Whittaker and Robinson (p. 159) is easily obtained by postulating a symmetrical distribution and reaching an ‘n-ages’ formula in the form of x 3 = 0, x 5 = –x 1, x 4 = –x 2, by solving the equations and . The quadrature formula results when the moments of the rectangular distribution are inserted. J. E. Kerrich's note Approximate Integration, J.I.A. Vol. LXIV, p. 545, is also of interest in this connexion.