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Forecasting Mortality using Imputed Data: The Case of Taiwan

Luo Sheng-Feng, Teng Huei-Wen () and Lee Yu-Hsuan
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Luo Sheng-Feng: Chung Yuan Christian University, Taoyuan City, Taiwan
Teng Huei-Wen: Graduate Institute of Statistics, National Central University, Taoyuan City, Taiwan
Lee Yu-Hsuan: Global Life Insurance, Co., LTD, Taipei City, Taiwan

Asia-Pacific Journal of Risk and Insurance, 2016, vol. 10, issue 1, 1-20

Abstract: Mortality forecasting plays an essential role in designing welfare policies and pricing aged-related financial derivatives. However, most prevailing models do not perform well in mortality forecasting particularly for the elder people. Indeed, the problem of missing category for the elderly is a typical feature in developing countries, because people are shorter-lived in earlier times and hence the mortality is recorded up to fewer age categories. For example, in Taiwan, the mortality is recorded up to an age of 95 before 1997, but as the improvement of life expectancy, the mortality is recorded up to an age of 100 afterwards. This paper proposes several approaches for data imputation to alleviate this systematic missing data problem of the mortality data. Motivated by Lee, and Carter. 1992. “Modelling and Forecasting the Time Series of US Mortality.” Journal of the American Statistical Association 87:659–71 and Renshaw, and Haberman. 2006. “A Cohort-Based Extension to the Lee-Carter Model for Mortality Reduction Factors.” Insurance: Mathematics and Economics 38:556–70, we employ factor models, in which age, period, and cohort are employed as useful effects. Simulation study and an empirical study using mortality data of Taiwan demonstrate the improvement in forecasting using a suitable data augmentation technique.

Date: 2016
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