Subjective Mortality Risk and Bequests

This paper investigates whether subjective expectations about future mortality affect consumption and bequests motives. We estimate a dynamic life-cycle model based on subjective survival rates and wealth from the panel dataset Asset and Health Dynamics among Oldest Old. We find that bequest motives are small on average, which indicates that most bequests are involuntary or accidental. Moreover, parameter estimates using subjective mortality risk perform better in predicting out-of-sample wealth levels than estimates using life table mortality risks, suggesting that decisions about consumption and saving are influenced more strongly by individual-level beliefs about mortality risk than by group level mortality risk.

A Statistical Model for Risk Stratification on the Basis of Left Ventricular Ejection Fraction and Heart-Rate Turbulence

The MPIP data set was used to obtain a model for mortality risk stratification of acute myocardial infarction patients. The predictors heart rate turbulence (HRT) and left-ventricular ejection fraction (LVEF) were employed. HRT was a categorical variable of three levels; LVEF was continuous and its influence on the relative risk was explained by the natural logarithm function (found using fractional polynomials). Cox - PH model with HRT and lnLVEF was constructed and used for risk stratification. The model can be used to divide the patients into two or more groups according to mortality risk. It also describes the relationship between risk and predictors by a (continuous) function, which allows the calculation of individual mortality risk

Securitization of Longevity and Mortality Risk

This paper deals with Alternative Risk Transfer (ART) through the securitization of longevity and mortality risks in pension plans and commercial life insurance. Various types of such mortality-linked securities are described (e.g., CATM bonds, longevity bonds, mortality forwards and futures, and mortality swaps). Pricing methods and real examples are given. Hypothetical calculations concerning the pricing of potential mortality forwards that correspond to the evolution of longevity in the Czech Republic are presented.ART, life insurance, life market, longevity risk, mortality risk, pension plans, securitization, tontines

Mortality Risk Valuation for Environmental Policy

Most benefit-cost analyses of reductions in air pollutants and other pollutants carrying mortality risks rely on estimates of the value of reductions in such risks produced by compensating wage studies, or contingent valuation studies that value risk reductions in the context of transport or job-related accidents. As the authors argue below, these estimates are inappropriate when valuing risk changes produced by environmental programs. The objectives of this paper are to explain why these estimates are inappropriate and to describe an improved approach to valuing reductions in risk of death from environmental programs, especially programs to reduce air pollution. The authors have implemented this approach in a pilot study in Tokyo, Japan. The paper provides estimates of the value of a statistical life based on the pilot study and describes extensions of the approach based on test results. The preliminary results from the Tokyo pilot indicate that individuals are able to distinguish between different magnitudes of small changes in mortality risks and between the same change in these risks occurring at different times (although the latter has not yet been subjected to an external scope test). Changes to the survey and a big increase in sample size may improve performance on the internal validity tests and the results of the scope tests. Although the current results can only be considered suggestive, if they were to remain after administration of the survey to a larger sample, and subject to some other caveats, they would imply that the VSL's currently used in benefit-cost analyses of environmental policies are significant overestimates.

Hedging Pure Endowments with Mortality Derivatives

In recent years, a market for mortality derivatives began developing as a way to handle systematic mortality risk, which is inherent in life insurance and annuity contracts. Systematic mortality risk is due to the uncertain development of future mortality intensities, or {\it hazard rates}. In this paper, we develop a theory for pricing pure endowments when hedging with a mortality forward is allowed. The hazard rate associated with the pure endowment and the reference hazard rate for the mortality forward are correlated and are modeled by diffusion processes. We price the pure endowment by assuming that the issuing company hedges its contract with the mortality forward and requires compensation for the unhedgeable part of the mortality risk in the form of a pre-specified instantaneous Sharpe ratio. The major result of this paper is that the value per contract solves a linear partial differential equation as the number of contracts approaches infinity. One can represent the limiting price as an expectation under an equivalent martingale measure. Another important result is that hedging with the mortality forward may raise or lower the price of this pure endowment comparing to its price without hedging, as determined in Bayraktar et al. [2009]. The market price of the reference mortality risk and the correlation between the two portfolios jointly determine the cost of hedging. We demonstrate our results using numerical examples.Comment: 33 Pages, 1 figur

Contextual effect on mortality of neighbourhood level education explained by earlier life deprivation

Various aspects of socioeconomic conditions in the neighbourhood have in recent years been found to have an influence on morbidity and mortality even after individual characteristics are taken into account.1 Increasing evidence suggests that to measure fully the impact social conditions may have on mortality risk, the whole life course must be taken into account as mortality risk increases cumulatively over the life course.2 Few studies have combined ecological and life course factors to see if contextual effects may be explained by social conditions earlier in life at the individual level.3,4 Most studies of neighbourhood effects have had a cross sectional design or with short follow up. Effects seen could be a consequence of the fact that people in these areas may have different earlier life experiences that have not been fully taken into account. In this study we examine whether the contextual effect of educational level aggregated to the neighbourhood on mortality risk could be explained by earlier life deprivation

Subjective well-being and mortality in Chinese oldest old

The present study investigates the relationship between subjective well-being (SWB) and mortality risk, using a large sample (N=7852) from the Chinese Longitudinal Healthy Longevity Study (age range 80-105) conducted in 2000 and 2002. Initially, we intended to contribute to the understanding of system relations between SWB, mortality risk, and unobserved heterogeneity by treating SWB as an endogenous variable, using a multi-process model. However, failure to identify unobserved heterogeneity in the mortality equation prevents us from employing this model. Given this limitation, the study examines three issues. First, we argue that the mortality model with duration dependency on the age of the study subjects is specified and that the model with duration dependency on time since the interview is misspecified. Second, we address problems associated with the identification of unobserved heterogeneity in the mortality equation. Third, we examine the association between SWB and mortality risk in the Chinese oldest old as well as the risk pattern by gender, without considering unobserved heterogeneity. We find that SWB is not a significant predictor of mortality risk when we control for socio-demographic characteristics and health status. Health plays a very important role in the relationship between SWB and mortality risk in the oldest old. Gender differences in the predictive pattern of SWB on this risk are negligible in the sample.China, mortality