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A dynamic bivariate common shock model with cumulative effect and its actuarial application

Title
A dynamic bivariate common shock model with cumulative effect and its actuarial application
Authors
Lee, HyunjuCha, Ji Hwan
Ewha Authors
차지환
SCOPUS Author ID
차지환scopus
Issue Date
2018
Journal Title
SCANDINAVIAN ACTUARIAL JOURNAL
ISSN
0346-1238JCR Link

1651-2030JCR Link
Citation
SCANDINAVIAN ACTUARIAL JOURNAL, no. 10, pp. 890 - 906
Keywords
Common shock modelshot noise processjoint lifestochastic dependencelife annuities
Publisher
TAYLOR &

FRANCIS LTD
Indexed
SCIE; SSCI; SCOPUS WOS
Document Type
Article
Abstract
Standard actuarial theory of multiple life insurance traditionally postulates independence for the remaining lifetimes mainly due to computational convenience rather than realism. In this paper, we propose a general common shock model for modelling dependent coupled lives and apply it to a life insurance model. In the proposed shock model, we consider not only simultaneous deaths of the coupled members due to a single shock (e.g. a critical accident), but also cumulative effect in the mortality rate when they survive shocks. Under the model, we derive a bivariate lifetime distribution and its marginal distributions in closed forms. We study the bivariate ageing property, dependence structure and the dependence orderings of the lifetime distribution. Based on it, we investigate the influence of dependence on the pricings of insurance policies involving multiple lives which are subject to common shocks. Furthermore, we discuss relevant useful stochastic bounds.
DOI
10.1080/03461238.2018.1470562
Appears in Collections:
자연과학대학 > 통계학전공 > Journal papers
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