Article2011

A Trend-Change Extension of the Cairns-Blake-Dowd Model

51 citations0/0 files storedAnnals of Actuarial Science

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Insurance, Mortality, Demography, Risk Management Statistical Distribution Estimation and Applications Statistical Methods in Epidemiology

Abstract

Abstract This paper builds on the two-factor mortality model known as the Cairns-Blake-Dowd (CBD) model, which is used to project future mortality. It is shown that these two factors do not follow a random walk, as proposed in the original model, but that each should instead be modelled as a random fluctuation around a trend, the trend changing periodically. The paper uses statistical techniques to determine the points at which there are statistically significant changes in each trend. The frequency of change in each trend is then used to project the frequency of future changes, and the sizes of historical changes are used to project the sizes of future changes. The results are then presented as fan charts, and used to estimate the range of possible future outcomes for period life expectancies. These projections show that modelling mortality rates in this way leaves much greater uncertainty over future life expectancy in the long term.

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References

1979Distribution of the Estimators for Autoregressive Time Series with a Unit Root 1992Modeling and Forecasting U. S. Mortality 2006The Determinants of Mortality 2006A Two‐Factor Model for Stochastic Mortality with Parameter Uncertainty: Theory and Calibration 2006A cohort-based extension to the Lee–Carter model for mortality reduction factors 2002A Poisson log-bilinear regression approach to the construction of projected lifetables 2009A Quantitative Comparison of Stochastic Mortality Models Using Data From England and Wales and the United States 2005Coherent mortality forecasts for a group of populations: An extension of the lee-carter method

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