1

Math Review

X
n=0

1
r =
1r

(r < 1)

n ax

n!

x e

m
X

n=0

dx =

an+1

ax

xe

Zu

tn eat dt =

n=0

1
dx = 2
a

and

X
xn

1 rm+1
r =
1r
n

2 ax

x e

n!

= ex
Z

2
dx = 3
a

(n) =

xn1 ex dx

(n + 1)
[1 p0 pn ] where the pk come from a Poisson dist. of = au
an+1

Basics of Survival Probabilities and Future Lifetimes

2.1

Basic definitions

fT (x) = t px x (t)

x (t) =

f (x)
d
= ln s(x)
s(x)
dx

t px

Rt

= e

x (s) ds

s(x + t)
s(x)

For a cohort, the central rate of failure from time x to x + n is n mx :

R x+n

n mx

f (t) dt
R xx+n
sx (t) dt
x

Lx `x
a(x) =
dx

Rn
o Rt px x (t) dt
n mx =
n
0 t px dt

ex:n =

n mx

n dx
n Lx

avg. # deaths
avg. # alive

Zn

n Lx

n Lx

`x

`x+t dt
0

2.2

Relations Between Whole Life, Term, and Endowment Products

1
Ax = Ax:n
+ n| Ax
1
Ax:n = Ax:n
+ Ax:n1

n| Ax = n Ex Ax+n

a
x = a
x:n + n| a
x
ax:n = a
x:n 1 + n Ex
x
n| a

= n Ex a
x+n

ax = a
x 1
Converting between discrete & continuous ins. and mth -ly annuities:
iAx = Ax
1
iAx:n = Ax:n


1
iAx:n
= Ax:n Ax:n1

a
(m)
= (m)
ax (m)
x
(m)

a
x:n = (m)
ax:n (m)[1 n Ex ]
(m)
n| a
x

= (m) n| a
x (m)n Ex

2.3

Future Lifetimes
E [min(T (x), n)] = 1st moment
Zn

ex:n = t t px x+t dt



E min(T (x), n)2 = 2nd moment

Zn

ex:n =

Zn
t px dt

Complete:

ex:n =

n
X

0
k px

Curtate:

k=0

2.4

n
X
(2k 1)k px
k=1

Fractional Lifetimes

Constant:
Uniform:
Hyperbolic:

2.5

2t t px dt

s px+t

`x+s = (1 s)`x + s`x+1

1
`x+s

(1 s)
s
+
`x
`x+1

s qx+t
s qx+t

= psx
sqx
=
1 tqx
=

x+s = x
qx
1 sqx
qx
=
1 (1 s)qx

x+s =

sqx
1 [1 (s + t)] qx

x+s

Variance Formulas
Var[ T ] = 2Ax A2x

Var[
ax ] =

2A
x

A2x
2

Var[
ax:n ] =

2A
x:n

A2x:n
2


2
P
(2Ax A2x )
(2Ax A2x )
2

Var[0 L] =
Ax ) b +
Var[0 L] =
=

(
ax )2
(1 Ax )2


2
P
Var[t L|T t] = (2Ax+t A2x+t ) b +
(Use above when eq. pr. gives P )

Z
Var[Txy ] = 2 t t pxy
e2xy
Cov[Txy , Txy ] = (
ex
exy )(
ey
exy )
(2Ax

Var[Bern(a, b, p)] = (a b)2 pq

Var[X] = Var[E(X|W )] + E[Var(X|W )]

Var[S] = tE[X ]

E[S] = tE[X]

(Compound Poisson)

Recursion Relations

3.1

Future Lifetimes

ex =
ex:n + n px
ex+n

ex = ex + 0.5

ex:n = px + px ex+1:n1

ex:n = ex:n + 0.5n qx

For select mortality of period t,

e[x]:n =
e[x]:t + t p[x]
ex+t:nt .

3.2

Insurances
Ax = qx + px Ax+1
Ax:n = qx + px Ax+1:n1

3.3

3.4

1
1
1
(IA)x:n
= Ax:n
+ px (IA)x+1:n1

1
1
Ax:n
= qx + px Ax+1:n1

1
1
1
(DA)x:n
= nAx:1
+ px (DA)x+1:n1

n| Ax

1
1
1
(DA)x:n
= Ax:n
+ (DA)x:n1

= px n1 Ax+1

Annuities
a
x = px a
x+1 + 1

a
x:n = px a
x+1:n1 + 1

ax = px ax+1 + px

ax:n = px ax+1:n1 + px

a
x = px a
x+1 + a
x:1

a
x:n = px a
x+1:n1 + a
x:1

x
n| a

= px n1| a
x+1

a
x:n = px a
x+1:n1 + qx a
n1 + 1

n| ax

= px n1| ax+1

ax:n = px ax+1:n1 + qx an1 +

x
n| a

= px n1| a
x+1

a
x:n = px a
x+1:n1 + qx a
n1 + a
1

Reserves

Refund of Reserve: t1 = qx+t1 (bt tV ) + tV t1V

(t1V + P ) (1 + i) Ft qx+t1
(Benefit or Terminal) Reserve: tV =
px+t1
e
[t1V + e Gct1 et1 ] (1 + i)
Expense Reserve: tV e =
px+t1
[t1V + G(1 ct1 ) et1 ] (1 + i) Ft qx+t1
Combined Reserve: tV =
px+t1
(d)

Asset Share:

t AS

(w)

[t1 AS + G(1 ct1 ) et1 ] (1 + i) Ft qx+t1 Ct qx+t1

(d)

(w)

1 qx+t1 qx+t1

In the above, P is benefit premium, G is expense-loaded premium, Ft and Ct are, respectively,

the Face and Cash values of the policy at time t. Expenses are denoted by ci for % of premium,
ei for per-policy, and e for the expense loading, e = G P .

4
4.1

Useful Formulas
Accumulated Value of Annuities
sx:n = Ex+n sx:n+1

1
n Ex

sx:n n Ex = a
x:n
sx:n P x:n1 = 1

= sx+1:n1 + 1
1
= sx:n + 1
n Ex
= sx+1:n1 +

4.2

1
n1 Ex+1

Three Premium Principle

1
= P x:n1
Px:n P x:n
n Px

1
P x:n
= P x:n1 Ax+n

1
Px P x:n
= P x:n1 nVx
1
1
P x:n
P x:t
= P x:u1

4.3

1
uV x:n

1
uV x:t

for u t n

Reserve Formulas
Annuity-Ratio:

tVx:n

Insurance-Ratio:

tVx:n

Paid-up insurance:

tVx:n

Premium difference:

tVx:n

a
x+t:nt
a
x:n
Ax+t:nt Ax:n
=
1 Ax:n


Px:n
= 1
Ax+t:nt
Px+t:nt


= Px+t:nt Px:n a
x+t:nt
=1

Multiple Lives

5.1

Probabilities

If (x) and (y) are independent,

t pxy

= t px t py

t qxy

t pxy

= t px + t py t pxy

xy = x + y

= t qxt qy

For any case:

xy =

Zn

exy:n =

t qxt py y (t)

+ t qyt px x (t)
t pxy

Zn
t pxy

exy =

dt

t pxy:n

dt

Z
Var [T (xy)] = 2

t t pxy dt
e2xy

5.2

Insurances & Friends

Axy + Axy = Ax + Ay

x + a
y
a
xy + a
xy = a
t pxy

Txy + Txy = Tx + Ty

+ t pxy = t px + t py
ax|y = ay axy

5.3

Contingent Survival

Probability that y dies first within n years from now:

1
n qxy

Zn
=

t px t py

RnR
0

f (x, y) dx dy

x lives at least t years; y dies in tth year (t n)

y+t dt

0
2
n qxy

Zn
=

t qy t px x+t

y dies within t years; x dies in year t (t n)

dt

0
2
n qxy

Zn
=

t|nt qx t py

y+t dt

x dies between years t and n; y dies in year t

Various identities:
1
1
q xy + qxy
1
1
n q xy + n qxy
2
2
qxy + qxy

1
q xy
1
n qxy

=1
= n qxy
= n qxy

= q xy2
= n q xy2 + n qxn py

6
6.1

Multiple Decrements
Probabilities
(j)
x+t

6.2

f (t, j)
( )
t px

d  (j) 
= ( )
t qx
dt
t px

(j)
t1| qx

( ) (j)
t px qx+t1

(j)
t qx

Zt
=

( ) (j)
s px x+s ds

Associated single-decrement tables

Let p0 and q 0 represent rates of decrement (i.e. assuming no other decrements are present).
0 (j)
t px

=e

Rt
0

(j)

0 (j)
t qx

x+s ds

Zt
=

0 (j) (j)
s px x+s ds

0 (j)
t px

( )
t px

(j)
t qx

= t qx( )

(j)

For uniform distribution of deaths, px0 (j) x = q x0 (j) .

0 (j)
s px

qx(1)

(1)
t|s qx

( )
s px

(1)
q x0

(1)
q x0

iqx(j) /qx( )

as long as decrements (j) and ( ) follow UDD.

 1

1  0 (2)
0 (3)
0 (2) 0 (3)
+
+ qx
q
q q
1
2 x
3 x x

when rates are uniform

 (t + s)3 t3 

(t + s)2 t2  0 (2)
0 (3)
0 (2) 0 (3)
s
+
qx + qx
qx qx
2
3