Non-Parametric Integral Estimation Using Data Clustering in Stochastic dynamic Programming: An Introduction Using Lifetime Financial Modelling

This paper considers an alternative way of structuring stochastic variables in a dynamic programming framework where the model structure dictates that numerical methods of solution are necessary. Rather than estimating integrals within a Bellman equation using quadrature nodes, we use nodes directly from the underlying data. An example of the application of this approach is presented using individual lifetime financial modelling. The results show that data-driven methods lead to the least losses in result accuracy compared to quadrature and Quasi-Monte Carlo approaches, using historical data as a base. These results hold for both a single stochastic variable and multiple stochastic variables. The results are significant for improving the computational accuracy of lifetime financial models and other models that employ stochastic dynamic programming.The authors gratefully acknowledge the 2016 Vice-Chancellor’s Research Seed Grant from Bond University and the 2015–16 Research School Grant from Australian National University

The Impact of Changes to the Unemployment Rate on Australian Disability Income Insurance Claim Incidence

We explore the extent to which claim incidence in Disability Income Insurance (DII) is affected by changes in the unemployment rate in Australia. Using data from 1986 to 2001, we fit a hurdle model to explore the presence and magnitude of the effect of changes in unemployment rate on the incidence of DII claims, controlling for policy holder characteristics and seasonality. We find a clear positive association between unemployment and claim incidence, and we explore this further by gender, age, deferment period, and occupation. A multinomial logistic regression model is fitted to cause of claim data in order to explore the relationship further, and it is shown that the proportion of claims due to accident increases markedly with rising unemployment. The results suggest that during periods of rising unemployment, insurers may face increased claims from policy holders with shorter deferment periods for white-collar workers and for medium and heavy manual workers. Our findings indicate that moral hazard may have a material impact on DII claim incidence and insurer business in periods of declining economic conditions

Primary Oral Myiasis: A Case Report

Myiasis commonly refers to invasion of live human or animal tissue by fly larvae of the Diptera order where they complete their cycle totally or in part, feeding on living or dead tissue, as well as on body fluids. Infestation of tissues of vertebrate species is pandemic but more frequently found in tropical and subtropical countries where poor hygiene, poor housing infrastructure, warm humid climate, and proximity with domestic animals prevail. Its diagnosis is made basically by the presence of larvae. The present paper reports a case of gingival myiasis involving 14–16 larvae in a 12-year-old boy

The impact of economic changes on disability income insurance and health in australia

This thesis empirically examines the impact of economic changes on: i. the health of the general Australian population, and ii. the claim incidence experience of the Australian Disability Income Insurance (DII) business. Changes in economic conditions have been captured via movements in the unemployment rate. Changes in health by the following two indicators: a. mortality rate, and b. per capita general physician (GP) visits. In many countries it has been established that short-run cyclical patterns in mortality are associated with economic fluctuations. In Chapter 2, an aggregate state level panel data analysis is used to investigate the general pattern of cyclical mortality in Australia for the period 1985-2008. Employing a fixed effects regression methodology, we show that there is a significant counter-cyclical pattern of mortality (mortality increases during economic contractions) in the general Australian population. Evidence in the literature suggests that the pattern of cyclical mortality experienced in other countries is varied. Drawing from this literature, it is argued that one reason for the observed counter-cyclical mortality in Australia is the relatively high level of social security expenditure. In Chapter 3, a poisson fixed effects analysis shows that, in Australia, over the period 1994-2010, per capita GP visits increase with economic expansions. This may indicate that self-perceived morbidity in Australia is pro-cyclical in nature. At first glance, while this result appears to be in contradiction with counter-cyclical mortality (established in Chapter 2), it is argued that the various financial and psychological factors that cause a reduction in GP visits during economic downturns may be a factor in explaining the increase in mortality observed in Chapter 2. Practitioners of DII commonly believe that DII claims experience is highly correlated with economic movements. In Chapter 4, using claims incidence data from Australian DII business for the period 1986-2001, and a conditional model, it is found that the incidence of claims significantly increases with increasing unemployment, illustrating a counter-cyclical pattern of claims incidence. Moreover, a multinomial logit analysis on cause of claim shows that the probability of a new claim arising from accidents significantly increases with increasing unemployment. The results suggest that the counter-cyclical pattern of claim incidence may stem from increasing claims for minor causes amongst the insured population. Our results are important from the perspective of policy makers and insurance companies. For example, to a policy maker, evidence of counter-cyclical mortality and pro-cyclical GP visits provides insights on the impact of economic changes on health. This may lead to further research in order to isolate the causes of these relationships and quantify the social costs associated with tackling the issues. From the perspective of an insurer, the counter-cyclical patterns of mortality and DII claims may help them to incorporate appropriate premium loadings and capital reserves in anticipation of economic downturns

The effect of objective formulation on retirement decision making

For a retiree who must maintain both investment and longevity risks, we consider the impact on decision making of focusing on an objective relating to the terminal wealth at retirement, instead of a more correct objective relating to a retirement income

Non-Parametric Integral Estimation Using Data Clustering in Stochastic dynamic Programming: An Introduction Using Lifetime Financial Modelling

This paper considers an alternative way of structuring stochastic variables in a dynamic programming framework where the model structure dictates that numerical methods of solution are necessary. Rather than estimating integrals within a Bellman equation using quadrature nodes, we use nodes directly from the underlying data. An example of the application of this approach is presented using individual lifetime financial modelling. The results show that data-driven methods lead to the least losses in result accuracy compared to quadrature and Quasi-Monte Carlo approaches, using historical data as a base. These results hold for both a single stochastic variable and multiple stochastic variables. The results are significant for improving the computational accuracy of lifetime financial models and other models that employ stochastic dynamic programming

How academic research can inform default superannuation fund design and individual financial decision-making

Defined contribution superannuation plans require fund members to make several decisions requiring a high level of financial expertise and participation. Most members do not have the expertise to make such decisions; hence, the onus falls on fund providers to offer default products that make the 'best' decision for their members, In this paper, we demonstrate mathematical tools that can assist in determining optimal decisions for members with various characteristics. We provide a specific example, in a simplified setting, showing that allowing for realistic elements like social security and tax has a material impact on optimal decisions. Finally, we discuss how such models might be used in the development of default options that better cater to the needs of members

The Impact of Changes to the Unemployment Rate on Australian Disability Income Insurance Claim Incidence

We explore the extent to which claim incidence in Disability Income Insurance (DII) is affected by changes in the unemployment rate in Australia. Using data from 1986 to 2001, we fit a hurdle model to explore the presence and magnitude of the effect of changes in unemployment rate on the incidence of DII claims, controlling for policy holder characteristics and seasonality. We find a clear positive association between unemployment and claim incidence, and we explore this further by gender, age, deferment period, and occupation. A multinomial logistic regression model is fitted to cause of claim data in order to explore the relationship further, and it is shown that the proportion of claims due to accident increases markedly with rising unemployment. The results suggest that during periods of rising unemployment, insurers may face increased claims from policy holders with shorter deferment periods for white-collar workers and for medium and heavy manual workers. Our findings indicate that moral hazard may have a material impact on DII claim incidence and insurer business in periods of declining economic conditions

Monotonicity of Savings Function in Endogenous Gridpoint Method with Stochastic Portfolio Returns

This paper provides a comprehensive proof of monotonicity of the savings function in the application of the Method of Endogenous Gridpoints (EGM) to problems with stochastic portfolio returns. The proof contributes to the completeness of solutions by providing the sufficient condition for the application of EGM to problems with stochastic portfolio returns as seen in the literature