, Volume 14, Issue 3, pp 286-315
Date: 03 Mar 2008

Mortality, longevity and experiments with the Lee–Carter model

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Abstract

The paper reviews the Lee–Carter modelling framework, illustrated with an application, and then extends the framework through the development of a wider class of generalised, parametric, non-linear models. The choice of error distribution is also generalised. These extensions permit the modelling and extrapolation of age-specific cohort effects as well as the more familiar age-specific period effects: the age-period-cohort version of the model is discussed with a worked example. The paper also provides a comparative study of simulation strategies for assessing risk in mortality rate predictions and the associated forecast estimates of life expectancy and annuity values in both period and cohort perspectives.

This paper is a more detailed presentation of the topics covered in the plenary lecture of the same title presented to the XIIth Applied Stochastic Models and Data Analysis conference in Chania, Crete in May 2007. A preliminary version was also presented to the workshop on Insurance and Risk Management at the University of Tilburg in April 2007. The authors are grateful to the participants of both conferences for very helpful comments and feedback.