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# Chapter 3: Survival Distributions and Life Tables

Distribution function of X:
Fx(:r) = Pr(X S; :1;)
Survival function B(.1:):
Probability of death between age :r and
age y:
Pr(.r < X S; z) F.J( (z) - Fx (:1:)
- B(Z)
Probability of death between age and
age y given survival to age :r::
Pr(:1; < X S; zlX >
Notations:
tlJx PriT(.r) tl
prob. (3:) dies within t years
distribution function of T(a:)
tPx Pr[T(:c) > t]
attains age ;1; +t
Pr[t < Tel') t +'Ill
t+ul]x - t(jx
t])a' t+u])x
tPx' u(]x-t-t
Relations with survival functions:
integer in T(x)):
Pr[K(.l') k] Pr[k T(:r) < k + 1]
k]Jx k+lPx
kP", . qx+k
klJx
Exam rv[ Life C;onting;;;ncicH - LGD@
Force of mortality flea:):
/1(:1: )
8' (x)
sex)
Relations between survival functions and
force of mortality:
exp ( -I"(Y)d
ll
)
x+n )
nPx exp - ! p.(y)ely
(
Derivatives:
d
dt t(jx
d
dt
tPx tPx . It (:r: +t)
d
-T
dt'"
d
-L
dt x
d
-1
Mean and variance of T and ](:
E[T(:r)]
Vo.7:T(:r:) ]
Vo:r[K(.r}]
complete expectation of life
=./ tP:B elt
o
curtate expectation of life
ex)
,J ,2
. t . tPx u,t - ex
2./
00
o
00
2)2k -1) kP:r
e".
2
k=l
Total lifetime after age .r: Ta
ex;
T-r: ./ lx+t dt
o
1
1
Varying benefit insul'ances:
(IA)x
=
./It + IJlIt, tPx !/'x(t)dt
0
11
./It + IJI/ ' t1
J
xl
t
x(t)dt
0
(X)
(IA)", ./ t ' l,t , tP:r p'o,(t)dt
0
11
(IA);"fll ./ t ' 7,t , tPx Itx (t)dt
0
11
CD"4.);':fll ./(n ItJ ' tPx fJ,x(t)dt
0
T1
(DA);':fll ./(n - t)vt , tPdl'x(t)dt
0
(IA)x Ax + VP:L,(1A)x+l
lIqx + 1)1'rr' +
nvqx +
(IA);:fll + (15A);:fll
+ = (n + l)A;:fll
(IA + (n +
Accumulated cost of insurance:
Share of the survivor:
accumulation factor
1
Interest theory reminder
1 v
n
am
l,n
1 i
n'fll
8
0fll
5
1 1
-
/5 '
00Cl
i d
- nvn
(Ia)fll
1
(IO)OCl
52
(n + l)Ofll (Ia)fll + (Da)m
-
5
i'IJ
1 1 +i
id 12
Doubling the constant force of interest 5
1 +i (1 + i)2 -4
1)2
v
-4
2i + i
2
d
2
d --+ 2d
i 2i + i
2
5
-+
25
Limit of interest rate i = 0:
A
o
, 1
nqx
n!Ax 11}1X
Ax:fll
mlnqx
(JA)x 1 +e:r:
(IA)x eo,
Exam l'vl - Life Cont.ingenciel\$ - LC;D'V 4
Chapter 5: Life Annuities
Whole life annuity: ax
J
00
Elan] at! t]Jx
+t)dt
o
00
Jvt'tPxdt
J
,x,)
tEx
dt
o o
1lor[an]
n-year temporary annuity:
t
J
n
. = J
n
v tllx dt
o 0
1
l
oriY]
n-year deferred annuity:
rAJ OC.
J . tPx dt Jt E ~ , d t 1,t
n n
Vor[Y]
2
aX!n)
n-yr certain and life annuity:
+ na,x
+
Most important identity
1 ba'T + )I
x
1 )Ix
1 ba'x:111
1 - (2b)
d
1 Ax:111
d
1 (lii
J
;:111 +
Recursion relations
+
+ nl
(Iii)x
1 +vpx
1 + v
2
Px
Whole life annuity due: 0,,;
00
E[ii K+lll L 11k. kPx
'..=0
Yor[oK+lll
n-yr temporary annuity due:
'11-1
E[Y] = Lv
k
. k]lx
k=O
n-yr deferred annuity due:
ex)
E[Y] = L . kP"
k=n
n-yr certain and life due: ii'x:111
k
0111 + L v . kllx
k=n
+n,O'T
Exam f,/l - Life COlltingencieh 5
Whole life immediate: ax
= L .~ ' P 2 :
k=1
1
m-thly annuities
Vo.r[Y]
1
rn.
.. (m) 1
(ra)
-(I
o'x:nl ax:-:m
'm
Accumulation function:
11
=/-1
o
Limit of interest rate i 0:
;=0
ax ---+ ex
ii,x 1
+
c2:
II
x ex
o.x:11I cx:rrl
;=0
---+ 1
+
ex:rrl
6
Loss function:
Loss PV of Benefit,s - PV of Premiums
(whole life and endowment only):
P(Ax)
ii",
(L4
x
P(A",)
1
1
P(A:r) =- -6
(l,;r
.. 2]
\/ar[L] (A,,:)
(1 + ~ r [
Var[L]
Var[L]
(whole life and endowment only):
P(A,,:) P
x
dAa:
P(Ax)
1- Ax
P(Ax) d
ax
(
1
pr
1 + d [
(A,,:)
2]
2Ax
(Ax?
\/ar[L]
(dii.".)2
<Ax - (Ax)2
\/ar[L] =
(1- A."Y
p(m)
#
A,,;
x:h\
Pure endowment annual premium P J : : ~ :
it is the reciprocal of the actuarial accumulated
value because the share of the survivor who
has deposited P:r:4 at the beginning of each year
for n years is the contractual \$1 pure endow
ment, i.e.
(1)
P minus P over P problems:
The difference in magnitude of level benefit pre
miums is solely attributable t.o the investment
feature of the contract. Hence, comparisons of
the policy values of survivors at age :/: + n lllay
he done by ana.lyzing future benefits:
P
l'"
(
n
P
x - x:nl)8x :m
lVIiscellaneous identities:
P(A
x
:
nl
)
P(Ax:m) +6
1
+d
Exa.m tv! LIfe Contin)1;en-C'ies - LGD(':;: 7
lkx =
lX+1 P.T

Chapter 7: Benefit Reserves
Benefit reserve tV:
The expected value of the prospect.ive loss at
time t.
Continuous reserve formulas:
Prospective: t V(Ax) Ax+t - P(Ax)a.x+t
Retrospective:
Paid-np Ins.:
tti(Ax) = P(AT).'lT;t]--
Annuity res.: tV(A;t.) = 1
Discrete reserve formulas:
h-payment reserves:

hr7' A )
Ie' '"ix:nl
Variance of the loss function
ass1lming EP Var[t L]
Cost of insurance: funding of the accumu
lated costs of the death claims incurred between
age ;1: and x +t by the living at t, e.g.
4
E
x
qT
-
Ax-;-n 0 =
nVT
-
- Ax+m
Relation between various terminal re
serves (whole life/endowment only):
= 1
(I - nV.,,+m)(l-
Exam ?vI - Contil1j2;llcieb - LGD 8
Chapter 8: Benefit Reserves
Notations:
br death benefit payable at the end of year of death for the j-th policy year
benefit premium paid at the beginning of the j-th policy year
b
t
: death benefit payable at the moment of death
7ft: annual rate of benefit premiums payable continuously at t
Benefit reserve:
00 00
hI! = Lbh+j j]Jx+h qx+h-tj - L
j=O j=O
U li
V + n)dl1 L 7ft+u V U P2'+t dv
o
Recursion relations:
hI! + 7fh l' f]x--;-h . bh-'-l +11 Px+h . h+1 If
(" + 7fh)(l +i) qx+h . + 11x+h . h+1 If
(hI! + (l+i) h+ll! + - h+1 V)
Terminology:
"policy year h+1" the policy year from time t = h to time t = h + 1
"hV + == initial benefit reserve for policy year h + 1
terminal benefit reserve for polky year h
terminal benefit reserve for policy year h + 1
Net amount at Risk for policy year h +1
='let Amount Risk
\Vhen the death benefit is defined as a function of the reserve:
For each preminm P, the cost of providing the ensuing year's death benefit, based on the net amount at
risk at age .T + h, is : - h-ti V). The leftover, P - vqx,h(/)h+l - h+IV) is the source of reserve
creation. Accullmlated to age :r +'TI, we have:
71-1
- htl it)] (1 +
L
h=O

- L1Hlx+h(bhl-l - 11-'-1 V)(l +
h=O
If the death benefit is equaJ to the benefit reserve for the first 17 policy yean,
If the death benefit is equal to plus the benefit reserve for the fiTst n policy years
71-1
L +
h=O
Exam Life Contingencies - LGD(:) 9 R
If the death benefit is equal to \$1 pIue; the benefit reserve for the first n policy years ane qxlh == q
COllfltant
n V =
Reserves at fractional durations:
(h1/ + 7Th)(l + sPx+h' +
UDD '* (hll + 7Th)(l +
V +8' his1/)
h+.sV . I-sqx+h+s . b
h
+1 + . l-sPx+h+s .
UDD '* h+8V (1-8)("V+7Th)+"("+lVr)
i.E. (1 .'\)(h1/)+ V)+ (1-.5)(7Th)
'-..r---"
Next year losses:
Ah losses incurred from time h to h +1
E[Ah] o
V01'[Ah l
The Hattendorf theorem

-.
Exam Ivi - Life ContingEl1cies LGDZ: 10
Chapter 9: Multiple Life Functions
Joint survival function:
t) Pr[T(.1:) > 8&T(y) > *1
(t,t)
Pr[T(:r.) > t and T(y) > tj
Joint life status:
FT(t) = Prlmin(T(:r),T(y)).s; t]
Independant lives
tjJ2' . tPy
t!J" + tqy tq," . tqll
Complete expectation of the joint-life sta
tus:
= J
(Xl
t1ixy dt
o
PDF joint-life status:
(t)
Independant lives
+t) +I-L(Y +t)
(t) t])x . tJ)ylf.L(:r. +t) +f.1(Y +t)]
Curtate joint-life functions:
/,])xy /,P2' . kPy [IL]
k(jxy kqx + k(jy - kqx . Ic(jy [IL]
Pr[K = k]
k])xy - k+1Pxy
kPxy . qx+k,y+"
kPxy' =
IJx+k +
00
E[K(;ry)]
2.:: kP,ry
1
Exam Life - LGDCS
Last survivor status T(xy):
T(J::Y) + T(.TY)
T(:ry) . T(XIJ)
+h(xy)
Fy(xy) +
tP:1'1I + tP.TY
Axy+
i'i. xy +
+
+
Variances:
FarfT(l1)]
Var[T(.I:Y)]
\/ar[T(;ry)]
Notes:
T(:r.) +T(y)
T(:r.) . T(y)
+
FT(x) +
tPx + tl)y
== Ax + -,,4y
+
ex + ey
Complete expectation of the last-survivor
status:
Jtl'Tydt
o
2 J
00
t tl)u
dt
o
00
2 Jt . tPxy dt
o
2 Jt t'Pxy dt
o
For joint-life Htat1lH, work with p's:
nPxll = n])2' ' nPy
For last-survivor status, work with q's:
"Exactly one" status:
nPxy - nPxy
nPx + nPy 2 11 px' nPy
n!]x + nqy - 211.I]x . n(jy
+ o.y - 20
xy
11
Common shock model:
(t) (t) . 8
z
(t)
ST*(x)(t) .
(t) (t) .
(t) . C-
At
(t) (t) 'T*(y) (t) . 8.,(t)
8Y*(X)(t) . (t) . C-
At
J1xy(t) = j1(;r + t) + J1(Y + t) + A
Insurance functions:
A" = L
k=Q
. "p." . qu+k
L
k=O
00
Pl'[E( k]
. kPxy'
00
k=O
Variance of insurance functions:
Vor[Z] - (An)2
Vor[Z] 2Axy (A
2
y)
2
,VY(x
y
)]
i1xy)( Ay
Covariance of T(:ry) and T(x!7):
Call [T(:ry), T(.TY)] Call [T(;r) , T(y)] + {E fT(;r)]
C01l T(y)] +
(ex (e
y
[IL]
Insurances:
1 -
1 - Oo.xy
1
d
1 _ d
1
-d
Annuity functions:
00
)' v
t
. tPu dt
o
Reversionary annuities:
A reversioanry annuity is payable during the ex
istence of one status n only if another status v
has failed. E.g. an annuity of 1 per year payable
continnollsly to (y) after the death of (x).
E [T(:J:Y)]}' {(E [T(y)] E :Tery)]}
Exa,m 1..,{ Life - LCD@ 12
Chapter 10 & 11: Multiple Decrement Models
Notations:
probability of decrement in the next
t yearH due to caUHe .7
= probability of decrement in the next
t yearH due to all caUHes
m
L
j=l
the force of decrement dHe only
to decrement j
the force of decrement due to all
causeH simultaneously
rn
L
j=l
probability of surviving t yearH
despite all decrementH
1
t
-/ (B)ds
e (l
Derivative:
_!i (
)
dt
Integral forms of tqx :
t
/ S ,
o
Exam IvI - Life LGD 13
Probability density functions:
.Joint PDF: hAt, j) (t)
Marginal PDF of J: fA.j) = 00
iX'
= / f:r,J(tLi)dt
o
Marginal PDF of T: f:r(t) (t)
171
= LhAt,
Conditional PDF: hlrUlt) = ---,.---
Survivorship group:
Group of people at some age a at time t o.
Each member of the group has a joint pdf for
time until decrement and cause of decrement.

/ fL!!) (t)dt
:r--a
L
m
j=1
171

j cce 1
Associated single decrement:
probability of decrement from caUHe j only
[ (,' )d'1
1 -
Basic relationships:
II
rn
P
I(;)
t x
;=1
UDD for multiple decrements:
t
t.
Decrements uniformly distributed in the
associated single decrement table:
t
1 .1(2) \
= (1 -q I
2 x )

Qx
1(1))
(1
2
l(1) ( 1 1(2) 1
...1. . ql(3))
qx \
1
- "2
Qx
. - 2 . 3 x x
Actuarial present values
Irh<;tead of summing the benefit8 for each pos
sible cause of death, it is often easier to write
the benefit as one benefit given regardless of the
cause of death and add/8ubtract other henefit8
according to the ca,lse of death.
p(T)
x
EXtn11 rvI Life Contingl;'ncies - 14
Chapter 15: lVlodels Including Expenses
Notations:
b face amount of the policy
Expense policy fee:
The portion of G that is independent of b.
Asset shares notations:
G level ann11al contract premimn
kAS asset share assigned to the policy at time t = k
Ck fraction of premium paid for expenses at k cG is the expel1xe premium)
Ck expenseH paid per policy at time t = k
probability of decrement by death
probability of decrement by withdrawal
"CiI cash amount due to the policy holder as a withdrawal benefit
b" death benefit due at time t = k
Recursion formula:
(1 +i)
Direct formula:
f G(l Ch) - eh h+1
Cl1
h=O
EXalTI l\j - Life COTIringencies - LGD@ 15
Constant Force of Mortality
Chapter 3
S CJ:)
Z"
nPJ:
1
E[T] E'X]
nPx)
1
1/or[T] Var[.1:] =
p.
ln2 . ]
Yledian[T] = Mechan,X
p.
e
x
Px = E[K]
qar
Chapter 4
/-1. + (j
f."
f.."+26
Ax (1 nEx)
q+i
Chapter 5
1
p.+
1
ax
Chapter 6
llqx = P;':11i
p
For fully discrete whole wi EP,
For fully continuous whole life, w IEP.
1/ m'[Loss] =
Chapter 7
t
V(A)
x
O. t 2: 0
O. k=O,l,2 ....
For discrete whole life, assuming
Vo1'[ "Los.s] p. If = 0, 1,2, ...
For fully continuous whole as:mming EP,
1/a/' [ 1,4x , t 2: 0
Chapter 9
For two COllstant forces, i. e. acting on (.1:)
and Il.F acting on (y), we have:
(hy + i
1 +i
qJ,y + i
1Jxy
e
xy
qJ'Y
Exam fvI Lift Contingencies - LGD<9 16
De Moivre's Law
Chapter 3
8(.1; )
,,1','
t1Jx p(.r + t)
Vor[T]
0(.1;)
Chapter 4
Chapter 3
8(.r)
ft(;r)
"Px
a 2(w-x) I
2AX
:r 2(w - x)
1-
W ow-xl
Ax
W -;r
W -.r
lo-- ex: (w - .1;)
W 07il

1
W -.r
!J.('r) =-
W -.r
(Io)w_xl
(IA)x
W -.1:
W -.T
(Io)w-xl
w-.r-T/
(IA)x
w-.r
w-.r
qx = !J.('r) = h(.r) , O.:s; t < W -.T (Io)7il
(IAX:7il
w-.r
"2(lx + Ix+d
1
(Io)7il
(IAX:7il
w-;r:
W -.1:
-2- = E[T] = Median[T]
W - .r _ = E[K]
2 2
Chapter 5
(w-.r)2
1-Ax d h
e No useful formulas: use ii.
x
-d- an. t
12
chapter 4 formulas.
(w _.r)2 -1
12
Chapter 9
qx 2d
x
1 - lx + l1:+1
W-;]:
1
--(= MDML with p. = 2/(w - .1:))
E[8]
.
=-
2 3
n
2(w - .1:)
nnPx + '2 "qx
3
T/
y-x]Jx Cyy + y-1,qx cy
e1':7il + '2 "l]x
For two lives with different w's, simply translate
a'w_xl
one of the age by the difference in w's. E.g.
w-:r:
a'7il
w-.r
Age 30, w = 100 {o} Age 15, w = 85
Modified De Moivre's Law
V or[T]
(1-
Chapter 9
(
w-.1:)C c
10 -----:;- ex: (w - .r)
W -.1:
c 2c+ 1
w -.r 2c
ex
o.
wIth j.t = -
w -.r
w -.r
w - .1: = E[T]
(
w-.T-n)C
c+1
Exam rvI - Life Contingenciet> - LGD 17