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Spatial Mortality Modelling with Economic Growth
Preprint

Spatial Mortality Modelling with Economic Growth

Abstract

Most research in the actuarial academic literature involving the mortality modeling of multiple populations has mainly focused on factor based approaches, with little attention on producing interpretable models of mortality which take space and geography into consideration. By proposing a family of models which extend the traditional stochastic mortality modeling framework to include spatial components, this study provides an investigation of the relationship between economic growth, as represented by the real gross domestic product (GDP), and mortality of the contiguous United States. The proposed spatial lag of GDP with GDP (SLGG) model was used to produce forecasts of mortality rates and annuity pricing for each of the states of the United States, and demonstrated the effects that economic growth has on mortality on a spatial dimension. Comparison of annuity pricing revealed that the SLGG model is shown to preserve more regional differences in the present value of a one unit annuity than the traditional Li and Lee (2005) model. This research provides a blueprint for the inclusion of spatial components and economic growth into mortality modeling. It establishes basis for development of spatial natural hedging techniques.

Authors

Cupido K; Jevtic P; Boonen TJ

Publication date

January 1, 2019

DOI

10.2139/ssrn.3496270

Preprint server

SSRN Electronic Journal
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