The setting of assumptions for future mortality and longevity requires a new approach that recognizes and quantifies the risk of results varying from the best estimate mortality and mortality improvement. Stochastic projections of future mortality rates help stratify and assign probabilities to the resulting scenarios. Stochastic analysis can simulate these patterns to examine the financial impact of possible changes in future mortality rates.
This article originally appeared in the Fall 2016 issue of Pension and Longevity Risk Transfer for Institutional Investors.
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