Longevity risk analysis: applications to the Italian regional data

Salvatore Scognamiglio; Salvatore Scognamiglio

doi:10.3934/QFE.2022006

Quantitative Finance and Economics

2022, Volume 6, Issue 1: 138-157. doi: 10.3934/QFE.2022006

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Research article

Longevity risk analysis: applications to the Italian regional data

Salvatore Scognamiglio ^,

Department of Management and Quantitative Sciences, University of Naples "Parthenope", Naples, Italy

Received: 03 March 2022 Revised: 27 March 2022 Accepted: 28 March 2022 Published: 30 March 2022
JEL Codes: C02, C15, C22

Longevity risk is the risk that members of a given population will live longer than expected. When it occurs, pension providers may have to pay pensions for longer than expected, significantly increasing their costs. While this risk is being adequately studied using the national mortality data provided by the Human Mortality Database, relatively few studies exist that analyse sub-national data. This manuscript proposes a comparative study of some stochastic mortality models to measure the longevity risk on Italian mortality data at the regional level. In particular, the use of the Lee-Carter and Li-Lee models is explored. The models are compared in fitting quality, forecasting accuracy and complexity. Numerical experiments and applications to immediate life annuity evaluation are presented.
- mortality modelling,
- multi-population mortality modelling,
- risk analysis,
- Lee–Carter model,
- time series forecasting
Citation: Salvatore Scognamiglio. Longevity risk analysis: applications to the Italian regional data[J]. Quantitative Finance and Economics, 2022, 6(1): 138-157. doi: 10.3934/QFE.2022006

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Abstract

Longevity risk is the risk that members of a given population will live longer than expected. When it occurs, pension providers may have to pay pensions for longer than expected, significantly increasing their costs. While this risk is being adequately studied using the national mortality data provided by the Human Mortality Database, relatively few studies exist that analyse sub-national data. This manuscript proposes a comparative study of some stochastic mortality models to measure the longevity risk on Italian mortality data at the regional level. In particular, the use of the Lee-Carter and Li-Lee models is explored. The models are compared in fitting quality, forecasting accuracy and complexity. Numerical experiments and applications to immediate life annuity evaluation are presented.

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