Constructing dynamic life tables with a single-factor model

David Atance (), Alejandro Balbás and Eliseo Navarro
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David Atance: Universidad de Alcalá
Alejandro Balbás: Universidad Carlos III de Madrid
Eliseo Navarro: Universidad de Alcalá

Decisions in Economics and Finance, 2020, vol. 43, issue 2, No 20, 787-825

Abstract: Abstract The paper deals with the mortality risk evolution and presents a one-factor model explaining the dynamics of all mortality rates. The selected factor will be the mortality rate at the key age, and an empirical study involving males and females in France and Spain reveals that the present approach is not outperformed by more complex factor models. The key age seems to reflect several advantages with respect to other factors available in the literature. Actually, it is totally observable, and the methodology may be easily extended so as to incorporate more factors (more key ages), a cohort effect, specific mortality causes or specific ages. Furthermore, the choice of a key age as an explanatory factor is inspired by former studies about the dynamics of interest rates which allows us to draw on the model in order to address some longevity risk-linked problems. Indeed, one only has to slightly modify some interest rate-linked methodologies. Illustrative examples will be given.

Keywords: Dynamic life table; Key mortality rate; Mortality; Forecasting; G52; G53; J11 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (3)

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DOI: 10.1007/s10203-020-00308-5

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