Modelling longevity risk using Lee-Carter model
Longevity risk is one of the remaining frontiers challenging modern financial markets and financial engineering. It is a major policy issue for governments around the world driven by the increase in the proportion of the aged resulting from improved healthcare and thus improved mortality rates. Increasing and uncertain longevity has emerged as a key risk affecting individuals, pension schemes, insurers and governments in both the developed and emerging world. This paper discusses longevity risk in detail, and its significance to the modern world.