MORTALITY MODELING WITH LEVY PROCESSES

Abstract

Mortality and longevity risk is usually one of the main risk components in economic capital models of insurance companies. Above all, future mortality expectations are an important input in the modeling and pricing of long term products. Deviations from the expectation can lead insurance company even to default if sufficient reserves and capital is not held. Thus, Modeling of mortality time series accurately is a vital concern for the insurance industry. The aim of this study is to perform distributional and spectral testing to the mortality data and practiced discrete and continuous time modeling. We believe, the results and the techniques used in this study will provide a basis for Value at Risk formula in case of mortality.

Keywords

• Mortality, Stochastic Modeling, Levy Processes, ARMA, GARCH, COGARCH

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