The age pattern of transitory mortality jumps and its impact on the pricing of catastrophic mortality bonds

Identifiability in age/period mortality models

“…In this case, the orthogonalisation of the period functions has the clear interpretation that κ t explains that part of the variation that is independent of the factor K(t). However, this was not done in Liu & Li (2015), which, in the context of that study, made it difficult to interpret the meaning of κ t for years when there was an epidemic.…”

“…where K(t) is either a deterministic function, such as in Callot et al (2014), or an exogenous variable such as real GDP or an indicator variable to account for an epidemic, such as in Liu & Li (2015), or a war. We also note that this type of model is common in multi-population models where the period function in one population is required to be the same as that in another, for instance, those of and Li & Lee (2005).…”

Identifiability in Age/Period Mortality Models

“…In this case, the orthogonalisation of the period functions has the clear interpretation that κ t explains that part of the variation that is independent of the factor K(t). However, this was not done in Liu and Li (2015), which, in the context of that study, made it difficult to interpret the meaning of κ t for years when there was an epidemic.…”

“…where K(t) is either a deterministic function, such as in Callot et al (2014), or an exogenous variable such as real GDP or an indicator variable to account for an epidemic, such as in Liu and Li (2015), or a war. We also note that this type of model is common in multi-population models where the period function in one population is required to be the same as that in another, for instance, those of Carter and Lee (1992) and Li and Lee (2005).…”

Estimation for a Second-Order Jump Diffusion Model from Discrete Observations: Application to Stock Market Returns

“…Second, they are economically attractive because they admit that stock prices change by sudden jumps in a short time, which is a reasonable assumption for an efficient stock market. Recently, jump noises have been also applied in population models to describe the abrupt changes of population sizes (see [9,10], etc.). For example, Zhou et al [9] introduced a two-population mortality model with transitory jump effects and applied it to pricing catastrophic mortality securitizations.…”