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Forward mortality and other vital rates - are they the way forward? (English) Zbl 1231.91459

Summary: We present a comparative study of stochastic interest and stochastic mortality showing that, despite a virtual similarity, the two concepts are fundamentally different. The notion of forward mortality rate, fetched from finance and now the latest thing in actuarial science, is predicted to soon go out of fashion. Trying it on, it does not fill the measurements of a well-made theoretical concept: there is an element of arbitrariness in its very definition, it disobeys certain self-evident parity requirements, and it fails to generalize to more complex models. It is concluded that forward rate modeling, while passable in the context of interest, is not the way forward in the context of mortality and more general life history analysis.

MSC:

91G30 Interest rates, asset pricing, etc. (stochastic models)
60G35 Signal detection and filtering (aspects of stochastic processes)
62N05 Reliability and life testing
91B30 Risk theory, insurance (MSC2010)
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