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Gaussian process models for mortality rates and improvement factors. (English) Zbl 1403.62193

Summary: We develop a Gaussian process (GP) framework for modeling mortality rates and mortality improvement factors. GP regression is a nonparametric, data-driven approach for determining the spatial dependence in mortality rates and jointly smoothing raw rates across dimensions, such as calendar year and age. The GP model quantifies uncertainty associated with smoothed historical experience and generates full stochastic trajectories for out-of-sample forecasts. Our framework is well suited for updating projections when newly available data arrives, and for dealing with “edge” issues where credibility is lower. We present a detailed analysis of GP model performance for US mortality experience based on the CDC (Center for Disease Control) datasets. We investigate the interaction between mean and residual modeling, Bayesian and non-Bayesian GP methodologies, accuracy of in-sample and out-of-sample forecasting, and stability of model parameters. We also document the general decline, along with strong age-dependency, in mortality improvement factors over the past few years, contrasting our findings with the Society of Actuaries (SOA) MP-2014 and -2015 models that do not fully reflect these recent trends.

MSC:

62P05 Applications of statistics to actuarial sciences and financial mathematics
60G15 Gaussian processes
62M20 Inference from stochastic processes and prediction
91B30 Risk theory, insurance (MSC2010)
91D20 Mathematical geography and demography
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