Modeling the forward surface of mortality
- Series
- Mathematical Finance/Financial Engineering Seminar
- Time
- Tuesday, October 20, 2009 - 15:00 for 1 hour (actually 50 minutes)
- Location
- Skiles 269
- Speaker
- Daniel Bauer – Georgia State University
In recent literature, different mothods have been proposed on how to define
and model stochastic mortality. In most of these approaches, the so-called spot force
of mortality is modeled as a stochastic process. In contrast to such spot force
models, forward force mortality models infer dynamics on the entire
age/term-structure of mortality.
This paper considers forward models defined based on best-estimate forecasts of
survival probabilities as can be found in so-called best-estimate generation life
tables. We provide a detailed analysis of forward mortality models deriven by
finite-dimensional Brownian motion. In particular, we address the relationship to
other modeling approaches, the consistency problem of parametric forward models, and
the existence of finite dimensional realizations for Gaussian forward models. All
results are illustrated based on a simple example with an affine specification.