Şahin, Ş.; Özen, S. A Quantitative Comparison of Mortality Models with Jumps: Pre- and Post-COVID Insights on Insurance Pricing. Risks2024, 12, 53.
Şahin, Ş.; Özen, S. A Quantitative Comparison of Mortality Models with Jumps: Pre- and Post-COVID Insights on Insurance Pricing. Risks 2024, 12, 53.
Şahin, Ş.; Özen, S. A Quantitative Comparison of Mortality Models with Jumps: Pre- and Post-COVID Insights on Insurance Pricing. Risks2024, 12, 53.
Şahin, Ş.; Özen, S. A Quantitative Comparison of Mortality Models with Jumps: Pre- and Post-COVID Insights on Insurance Pricing. Risks 2024, 12, 53.
Abstract
Population events such as natural disasters, pandemics, extreme weather, and wars might cause jumps that have an immediate impact on mortality rates. The recent COVID-19 pandemic has demonstrated that these events should not be treated as nonrepetitive exogenous interventions. Therefore, mortality models incorporating jump effects are particularly important to capture the adverse mortality shocks. The mortality models with jumps, proposed by Cox. et al. , Chen and Cox , and Özen and Şahin , which we consider in this study, differ in terms of the duration of the jumps - transitory or permanent, frequency of the jumps, and size of the jumps. To illustrate the effect of jumps, we also consider benchmark mortality models without jump effects, such as the Lee-Carter , Renshaw and Haberman and the Cairns-Blake-Dowd models. We discuss the performance of all the models by analysing their ability to capture the mortality deterioration caused by COVID-19. We use data from different countries to simulate the mortality rates for the pandemic years and examine their accuracy in forecasting the mortality jumps due to the pandemic. Moreover, we also analyse the impact of mortality jump models on catastrophe bond pricing.
Computer Science and Mathematics, Probability and Statistics
Copyright:
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
