Sect 2 2

Chapter 2. Survival models.
Manual for SOA Exam MLC.

Chapter 2. Survival models.
Section 2.2. Actuarial notation for survival analysis..
2009.
c Miguel A. Arcones. All rights reserved.
Extract from:
”Arcones’ Manual for SOA Exam MLC. Fall 2009 Edition”,
available at http://www.actexmadriver.com/
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2009.
c Miguel A. Arcones. All rights reserved. Manual for SOA Exam MLC.
Chapter 2. Survival models. Section 2.2. Actuarial notation for survival analysis.
Future lifetime of a life aged x.
Definition 1
We denote by (x) to a life that survives to age x.
(x) is called a life–age–x or a life aged x.
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Definition 1
Definition 2
We denote by T (x) = X − x is the future lifetime of (x), i.e.
T (x) = X − x is time–until–death of an entity with age x.
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Definition 1
Definition 2
We denote by T (x) = X − x is the future lifetime of (x), i.e.
T (x) = X − x is time–until–death of an entity with age x.
An alternative notation for T (x) is Tx . Notice that T0 = X , i.e.
the future lifetime of an entity with age zero is the age–at–failure.
Notice that since T (x) is defined only for a life which survives to
age x, probabilities for T (x) are conditional probabilities.
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The survival function of T (x) is

P{X − x > t, X > x}
P{T (x) > t} = P{X − x > t|X > x} =
P{X > x}
s(x + t)
= , t ≥ 0.
s(x)
The density of T (x) is
d d s(x + t) fX (x + t)
fT (x) (t) = − P{T (x) > t} = − = , t ≥ 0.
dt dt s(x) s(x)
We denote the density of T (x) by
fX (x + t)
fX (x + t|X > x) = , t ≥ 0.
s(x)
The cumulative distribution function of T (x) is
s(x) − s(x + t)
P{T (x) ≤ t} = 1 − P{T (x) > t} = .
s(x)
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Example 1
6 6
Consider the survival function SX (t) = 9090−t
6 , for 0 < t < 90.
Find the survival function and the probability density function of
T (x).
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Example 1
6 6
6 , for 0 < t < 90.
T (x).
Solution: The survival function of T (x) is
906 −(x+t)6
s(x + t) 906 906 − (x + t)6
= 906 −x 6
= , 0 ≤ t ≤ 90 − x.
s(x) 906 − x 6
906
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Example 1
6 6
6 , for 0 < t < 90.
T (x).
Solution: The survival function of T (x) is
906 −(x+t)6
s(x + t) 906 906 − (x + t)6
= 906 −x 6
= , 0 ≤ t ≤ 90 − x.
s(x) 906 − x 6
906
The probability density function of T (x) is
d 906 − (x + t)6

d s(x + t)
fT (x) (t) = − =−
dt s(x) dt 906 − x 6
6(x + t) 5
= 6 , 0 ≤ t ≤ 90 − x.
90 − x 6
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Definition 3
The probability that a life aged x survives t years is denoted by t px .
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Definition 3
Notice that t px is the survival function of T (x), i.e.
s(x + t)
t px = P{T (x) > t} = P{X > x + t|X > x} = .
s(x)
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Definition 3
s(x + t)
t px = P{T (x) > t} = P{X > x + t|X > x} = .
s(x)
The survival function of the age–at–death X is t p0 , t ≥ 0.
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Definition 3
s(x + t)
t px = P{T (x) > t} = P{X > x + t|X > x} = .
s(x)
The survival function of the age–at–death X is t p0 , t ≥ 0.

Since t px , t ≥ 0, is the survival function of T (x),
d
fT (x) (t) = − t px , t ≥ 0,
dt
and Z ∞
t px = fT (x) (t) ds, t ≥ 0.
t
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Example 2
t
Suppose that t px = 1 − 90−x , 0 ≤ t ≤ 90 − x, find the probability
that a 25–year–old reaches age 80.
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Example 2
t
Suppose that t px = 1 − 90−x , 0 ≤ t ≤ 90 − x, find the probability
that a 25–year–old reaches age 80.
Solution: The probability that a 25–year-old reaches age 80 is
55 2
80−25 p25 = 55 p25 = 1 − = .
90 − 25 13
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Example 3
t
Suppose that t px = 1 − 90−x , 0 ≤ t ≤ 90 − x, find the density of
T (x).
Solution: The density of T (x).
d 1
fT (x) (t) = − t px = , 0 ≤ t ≤ 90 − x.
dt 90 − x
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Theorem 1
m+n px = m px · n px+m .
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Theorem 1
Proof: We have that

s(x + m) s(x + m + n) s(x + m + n)
m px · n px+m = = = m+n px .
s(x) s(x + m) s(x)
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Theorem 1
Proof: We have that

s(x + m) s(x + m + n) s(x + m + n)
m px · n px+m = = = m+n px .
s(x) s(x + m) s(x)
By induction, the previous theorem implies that
Pk
nj px = n1 px · n2 px+n1 · n3 px+n1 +n2 · · · nk px+Pk−1 nj .
j=1 j=1
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Example 4
Suppose that probability that a 30–year–old reaches age 40 is 0.95,
the probability that a 40–year–old reaches age 50 is 0.90, and the
probability that a 50–year–old reaches age 60 is 0.95. Find the
probability that a 30–year–old reaches age 60.
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Example 4
Suppose that probability that a 30–year–old reaches age 40 is 0.95,
the probability that a 40–year–old reaches age 50 is 0.90, and the
probability that a 50–year–old reaches age 60 is 0.95. Find the
probability that a 30–year–old reaches age 60.
Solution: The probability that a 30–year–old reaches age 60 is
30 p30 = 10 p30 · 10 p40 · 10 p50 = (0.95)(0.99)(0.95) = 0.893475.
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Definition 4
The probability that a life aged x will die within t years is denoted
by t qx .
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Definition 4
by t qx .
Notice that t qx is the cumulative distribution function of T (x), i.e.
s(x) − s(x + t)
t qx = P{T (x) ≤ t} = P{X ≤ x + t|X > x} = .
s(x)
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Definition 4
by t qx .
s(x) − s(x + t)
t qx = P{T (x) ≤ t} = P{X ≤ x + t|X > x} = .
s(x)
It is easy to see that t qx = 1 − t px .
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Definition 4
by t qx .
s(x) − s(x + t)
t qx = P{T (x) ≤ t} = P{X ≤ x + t|X > x} = .
s(x)
It is easy to see that t qx = 1 − t px .

t q0 is the cumulative distribution function of the age–at–death X .
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Example 5
t
Suppose that t qx = 95−x , 0 ≤ t ≤ 95 − x, find the probability that
a 30–year–old dies before age 75.
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Example 5
t
Suppose that t qx = 95−x , 0 ≤ t ≤ 95 − x, find the probability that
a 30–year–old dies before age 75.
Solution: The probability that a 30–year–old dies before age 75 is
45 9
75−30 q30 = 45 q30 = = .
95 − 30 13
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Definition 5
px is the probability that a life aged x survives one year, i.e.
s(x + 1)
px = P{X > x + 1|X > x} = .
s(x)
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Definition 5
px is the probability that a life aged x survives one year, i.e.
s(x + 1)
px = P{X > x + 1|X > x} = .
s(x)
Notice that px = 1 px .
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Theorem 2
n px = px px+1 . . . px+n−1 .
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Theorem 2
n px = px px+1 . . . px+n−1 .
Proof: We have that

s(x + 1) s(x + 2) s(x + n)
px px+1 . . . px+n−1 = ···
s(x) s(x + 1) s(x + n − 1)
s(x + n)
= = n px .
s(x)
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Example 6
Suppose that
k 29 30 31 32 33 34 35 36
pk 0.99 0.98 0.97 0.96 0.96 0.95 0.94 0.93
Find the probability that a 30–year old survives to age 35.
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Example 6
Suppose that
k 29 30 31 32 33 34 35 36
pk 0.99 0.98 0.97 0.96 0.96 0.95 0.94 0.93
Find the probability that a 30–year old survives to age 35.
Solution: The probability that a 30–year old survives to age 35 is
5 p30 = p30 p31 p32 p33 p34 = (0.98)(0.97)(0.96)(0.96)(0.95)

=0.832269312.
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Definition 6
qx is the probability that a life aged x will die within one year, i.e.
s(x) − s(x + 1)
qx = P{X ≤ x + 1|X > x} = .
s(x)
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2009.
Definition 6
qx is the probability that a life aged x will die within one year, i.e.
s(x) − s(x + 1)
qx = P{X ≤ x + 1|X > x} = .
s(x)
Notice that qx = 1 qx .
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Example 7
906 −x 6
Consider the survival function SX (x) = 906
, for 0 < x < 90.
Find t px , t qx , px , qx .
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2009.
Example 7
906 −x 6
Consider the survival function SX (x) = 906
, for 0 < x < 90.
Find t px , t qx , px , qx .
Solution: We have that
906 −(x+t)6
s(x + t) 906 906 − (x + t)6
t px = = 906 −x 6
= , 0 ≤ t ≤ 90 − x,
s(x) 906 − x 6
906
906 −x 6 906 −(x+t)6
s(x) − s(x + t) 906
− 906
t qx = = 906 −x 6
s(x)
906
(x + t)6 − x 6
= , 0 ≤ t ≤ 90 − x,
906 − x 6
906 − (x + 1)6
px = 1 px = , 0 ≤ x ≤ 89,
906 − x 6
(x + 1)6 − x 6
qx = 1 qx = , 0 ≤ x ≤ 89.
906 − x 6
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Theorem 3
1 = qk + pk qk+1 + 2 pk qk+2 + 3 pk qk+3 + · · ·
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Theorem 3
1 = qk + pk qk+1 + 2 pk qk+2 + 3 pk qk+3 + · · ·
Proof: We have that qk = P{X ≤ k},
s(k) − s(k + 1)
pk qk+1 = s(k) = s(k)−s(k+1) = P{k < X ≤ k+1},
s(k)
s(k + 2) s(k + 1) − s(k + 2)

2 pk qk+2 = )
s(k) s(k + 2)
=s(k + 1) − s(k + 2) = P{k + 1 < X ≤ k + 2}
and so on. Hence,
qk + pk qk+1 + 2 pk qk+2 + 3 pk qk+3 + · · ·

=P{X ≤ k} + P{k < X ≤ k + 1} + P{k + 1 < X ≤ k + 2} + · · · = 1.
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Definition 7
Given x, s, t > 0, s |t qx represents the probability of a life just
turning age x will die between ages x + s and x + s + t, i.e.
s(x + s) − s(x + s + t)
s |t qx = P{s < T (x) ≤ s + t} = .
s(x)
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Definition 7
s(x + s) − s(x + s + t)
s |t qx = P{s < T (x) ≤ s + t} = .
s(x)
The symbol s |t means deferred for s years and happening within

the next m years.
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Definition 7
s(x + s) − s(x + s + t)
s |t qx = P{s < T (x) ≤ s + t} = .
s(x)
The symbol s |t means deferred for s years and happening within

the next m years.
We abbreviate t |qx = t |t+1 qx .
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Example 8
6 6
Consider the survival function SX (x) = 9090−x 6 , for 0 < x < 90.
(i) Find s |t qx , for 0 < x, s, t and x + s + t ≤ 90.
(ii) Find the probability that a 30-year-old dies between ages 55
and 60.
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Example 8
6 6
and 60.
Solution: (i) We have that
906 −(x+s)6 6 6
s(x + s) − s(x + s + t) 906
− 90 −(x+s+t)
906
s |t qx = = 906 −x 6
s(x)
906
(x + s + t)6 − (x + s)6
= .
906 − x 6
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2009.
Example 8
6 6
and 60.
Solution: (i) We have that
906 −(x+s)6 6 6
s(x + s) − s(x + s + t) 906
− 90 −(x+s+t)
906
s |t qx = = 906 −x 6
s(x)
906
(x + s + t)6 − (x + s)6
= .
906 − x 6
(ii) The probability that a 30–year–old dies between ages 55 and
60 is
(60)6 − (55)6
25 |5 q30 = = 0.03575453.
(90)6 − (30)6
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Theorem 4
s |t qx = s px − s+t px = s px · t qx+s .
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Theorem 4
s |t qx = s px − s+t px = s px · t qx+s .
Proof: We have that
s |t qx = P{s < T (x) ≤ s + t} = P{s < T (x)} − P{s + t < T (x)}

=s px − s+t px
and
s(x + s) s(x + s) − s(x + s + t)
s px · t qx+s =
s(x) s(x + s)
s(x + s) − s(x + s + t)
= = s |t qx .
s(x)
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2009.
Example 9
Suppose that:
(i) The probability that a 30–year–old will reach age 60 is 0.90.
(ii) The probability that a 30–year–old will reach age 50 is 0.95.
Find the probability that a 30–year–old will die between age 50 and
60.
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Example 9
Suppose that:
60.
20 |10 q30 = 20 p30 − 30 p30 = 0.95 − 0.90 = 0.05.
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Example 10
Suppose that:
60.
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Example 10
Suppose that:
60.
20 |10 q30 = 20 p30 · 10 q50 = (0.90)(1 − 0.95) = 0.045.
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Chapter 2. Survival models.

Manual for SOA Exam MLC.

Future lifetime of a life aged x.

Future lifetime of a life aged x.

Future lifetime of a life aged x.

The survival function of T (x) is

The probability density function of T (x) is

The survival function of the age–at–death X is t p0 , t ≥ 0.

The survival function of the age–at–death X is t p0 , t ≥ 0.

Proof: We have that

Proof: We have that

By induction, the previous theorem implies that

30 p30 = 10 p30 · 10 p40 · 10 p50 = (0.95)(0.99)(0.95) = 0.893475.

It is easy to see that t qx = 1 − t px .

It is easy to see that t qx = 1 − t px .

Proof: We have that

5 p30 = p30 p31 p32 p33 p34 = (0.98)(0.97)(0.96)(0.96)(0.95)

1 = qk + pk qk+1 + 2 pk qk+2 + 3 pk qk+3 + · · ·

1 = qk + pk qk+1 + 2 pk qk+2 + 3 pk qk+3 + · · ·

Proof: We have that qk = P{X ≤ k},

s(k + 2) s(k + 1) − s(k + 2)

and so on. Hence,

qk + pk qk+1 + 2 pk qk+2 + 3 pk qk+3 + · · ·

The symbol s |t means deferred for s years and happening within

The symbol s |t means deferred for s years and happening within

Proof: We have that

s |t qx = P{s < T (x) ≤ s + t} = P{s < T (x)} − P{s + t < T (x)}

20 |10 q30 = 20 p30 − 30 p30 = 0.95 − 0.90 = 0.05.

20 |10 q30 = 20 p30 · 10 q50 = (0.90)(1 − 0.95) = 0.045.

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