TITLE:
Assessing Actuarial Projections Accuracy: Traditional vs. Experimental Strategy
AUTHORS:
Maria Russolillo
KEYWORDS:
Lee-Carter Model, Singular Value Decomposition, Experimental Strategy, Mortality Projections, Life Expectancy at Birth
JOURNAL NAME:
Open Journal of Statistics,
Vol.7 No.4,
August
9,
2017
ABSTRACT: This paper gives an overview of the Lee Carter
method and reiterates the feasibility of using it to construct mortality
forecast for the population data. In a first step, the model is fitted in a
traditional way and used to extrapolate forecast of the time-varying mortality
index. The observed pattern of the mortality rates shows a different
variability at different ages, highlighting that the homoscedasticity
hypothesis is quite unrealistic. Thus, in a second step, the paper aims to
produce more reliable mortality forecasting, focusing on the errors in the
estimation of the model parameters. The robustness of the estimated parameter
is analysed throughout an experimental strategy which allows to assess the
robustness of the Lee Carter model by inducing the errors to satisfy the homoscedasticity
hypothesis. The graphical and numerical results are tested by means of a comparison in terms of prediction accuracy.