Application of Copulas to Modelling of Marriage Reverse Annuity Contract

Joanna Dębicka, Stanisław Heilpern and Agnieszka Marciniuk

Prague Economic Papers, 2020, vol. 2020, issue 4, 445-468

Abstract: We model the probabilistic structure and cash flows arising from marriage reverse annuity contracts in the case of the joint-life status and the last surviving status. In contrast to the classical approach, we take into consideration that future lifetimes between spouses are dependent. The structure of dependence of the length of spouses' lives is modelled using copulas. The term structure of interest rate is modelled using a time-dependent function. The numerical results are based on actual Polish data covering both the structure of the probabilistic model and the interest rate.

Keywords: Longevity risk; dependent lifetimes; reverse annuity contract; selling model; multistate model; copula; equity release contracts (search for similar items in EconPapers)
JEL-codes: C60 G17 G22 J10 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (1)

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DOI: 10.18267/j.pep.745

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