Love and death: A Freund model with frailty

Christian Gourieroux and Yang Lu

Insurance: Mathematics and Economics, 2015, vol. 63, issue C, 191-203

Abstract: We introduce new models for analyzing the mortality dependence between individuals in a couple. The mortality risk dependence is usually taken into account in the actuarial literature by introducing special copulas with continuous density. This practice implies symmetric effects on the remaining lifetime of the surviving spouse. The new model allows for both asymmetric reactions by means of a Freund model, and risk dependence by means of an unobservable common risk factor (or frailty). These models allow for distinguishing in the lifetime dependence the component due to common lifetime (frailty) from the jump in mortality intensity upon death of spouse (Freund model). The model is applied to the pricing of insurance products such as joint life policy, last survivor insurance, or contracts with reversionary annuities. A discussion of identification is also provided.

Keywords: Life insurance; Coupled lives; Frailty; Freund model; Broken-heart; Copula; Last survivor insurance; Competing risks (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (11)

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Related works:
Working Paper: Love and death: A Freund model with frailty (2015)
Working Paper: Love and Death: A Freund Model with Frailty (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:insuma:v:63:y:2015:i:c:p:191-203

DOI: 10.1016/j.insmatheco.2015.03.016

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