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Modeling longevity risk with generalized dynamic factor models and vine-copulae. (English) Zbl 1390.91174

Summary: 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.

MSC:

91B30 Risk theory, insurance (MSC2010)
62P05 Applications of statistics to actuarial sciences and financial mathematics
62M10 Time series, auto-correlation, regression, etc. in statistics (GARCH)

Software:

QRM; MARSS
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References:

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