Stochastic Mortality Models and Pandemic Shocks

After decades of worldwide steady improvements in life expectancy, the COVID-19 pandemic produced a shock that had an extraordinary immediate impact on mortality rates globally. This shock had largely heterogeneous effects across cohorts, socio-economic groups, and nations. It represents a remarkable departure from the secular trends that most of the mortality models have been constructed to capture. Thus, this chapter aims to review the existing literature on stochastic mortality, discussing the features that these models should have in order to be able to incorporate the behaviour of mortality rates following shocks such as the one produced by the COVID-19 pandemic. Multi-population models are needed to describe the heterogeneous impact of pandemic shocks across cohorts of individuals. However, very few of them so far have included jumps. We contribute to the literature by describing a general framework for multi-population models with jumps in continuous-time, using affine jump-diffusive processes.