Forecasting age distribution of death counts

an application to annuity pricing

Han Lin Shang*, Steven Haberman

*Corresponding author for this work

Research output: Contribution to journalArticle

Abstract

We consider a compositional data analysis approach to forecasting the age distribution of death counts. Using the age-specific period life-table death counts in Australia obtained from the Human Mortality Database, the compositional data analysis approach produces more accurate 1- to 20-step-ahead point and interval forecasts than Lee–Carter method, Hyndman–Ullah method and two naïve random walk methods. The improved forecast accuracy of period life-table death counts is of great interest to demographers for estimating survival probabilities and life expectancy, and to actuaries for determining temporary annuity prices for various ages and maturities. Although we focus on temporary annuity prices, we consider long-term contracts that make the annuity almost lifetime, in particular when the age at entry is sufficiently high.
Original languageEnglish
Pages (from-to)150-169
Number of pages20
JournalAnnals of Actuarial Science
Volume14
Issue number1
DOIs
Publication statusPublished - 17 Mar 2020
Externally publishedYes

Keywords

  • Compositional data analysis
  • life-table death counts
  • log-ratio transformation
  • principal component analysis
  • single-premium temporary annuity

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