Modelling and management of mortality risk: a review

Andrew Cairns, David Blake and Kevin Dowd

Scandinavian Actuarial Journal, 2008, vol. 2008, issue 2-3, 79-113

Abstract: In the first part of the paper, we consider the wide range of extrapolative stochastic mortality models that have been proposed over the last 15–20 years. A number of models that we consider are framed in discrete time and place emphasis on the statistical aspects of modelling and forecasting. We discuss how these models can be evaluated, compared and contrasted. We also discuss a discrete-time market model that facilitates valuation of mortality-linked contracts with embedded options. We then review several approaches to modelling mortality in continuous time. These models tend to be simpler in nature, but make it possible to examine the potential for dynamic hedging of mortality risk. Finally, we review a range of financial instruments (traded and over-the-counter) that could be used to hedge mortality risk. Some of these, such as mortality swaps, already exist, while others anticipate future developments in the market.

Date: 2008
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Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:taf:sactxx:v:2008:y:2008:i:2-3:p:79-113

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DOI: 10.1080/03461230802173608

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