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http://hdl.handle.net/10174/7344
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Title: | Modeling Longevity Risk using Extreme Value Theory: An Empirical Investigation using Portuguese and Spanish Population Data |
Authors: | Bravo, Jorge Real, Pedro |
Editors: | Portuguese Finance Network Conference |
Keywords: | longevity risk extreme value theory life tables maximum life span |
Issue Date: | 2012 |
Publisher: | Portuguese Finance Network |
Citation: | Bravo, J. M. and Real, P. C. (2012). Modeling Longevity Risk using Extreme Value Theory, Proceedings of the 7th Finance Conference of the Portuguese Finance Network, July 5-7, 2012, Aveiro, Portugal. ISBN: 978-972-789-362-1. |
Abstract: | Extreme value theory (EVT) provides a framework to formalize the study of behaviour
in the tails of a distribution. In this paper we use EVT to model the statistical behaviour
of mortality rates over a given high threshold age and to estimate the significance of rare
longevity risk in a given population. We adopt a piecewise approach in estimating the
optimal threshold age using an iterative algorithm of maximum likelihood estimation.that
statistically determines the cut-off between the central (Gompertz) part of the distribution
and the upper tail modelled using the generalized Pareto distribution. The model is
empirically tested using the most recent period mortality data for the total, male and
female populations of Portugal and Spain. We use some classical results from EVT
to estimate the evolution of the theoretical maximum life span over time and to derive
confidence intervals for the central estimates. We then use time series methods to forecast
the highest attained age. We observe a good fit of the model in all populations and
subperiods analysed and on the whole life span considered. We estimate an increase in
the theoretical maximum life span over time for all populations, more significant in the
male subpopulations. |
URI: | http://hdl.handle.net/10174/7344 |
ISBN: | 978-972-789-362-1 |
Type: | article |
Appears in Collections: | ECN - Artigos em Livros de Actas/Proceedings
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