Actuarial Mathematics II

Hand-Out 2: Lifetime Models

Frank Coolen (CM206 - Frank.Coolen@durham.ac.uk), February 2014
We study basic theory and models for probabilities on individuals future lifetimes. These will be used later
in this course, in combination with results on interest, present values, and annuities, for theory of life insurance
and life annuities. We consider both simple probability distributions and so-called life tables, which reect survival
probabilities via statistical information on survival for large populations. There are many issues which make practical
use of life tables less straightforward; although we will discuss this a bit, in this course we will mostly assume that
a life table is provided that is appropriate for the problems considered. On a separate hand-out, an example life
table will be provided, taken from the book by Gerber (also available on the module webpage). That hand-out also
contains so-called commutation columns, corresponding to that life table, which we will use later this course.
Exercises
2-1. Let
t
p
x
=
100xt
100x
, for 0 x < 100 and 0 t 100 x. Calculate
10
q
45
,
10|10
q
45
and
45
.
2-2. Let
t
p
0
=

t
100

1/2
, for 0 t 100. Calculate
17
p
19
,
15
q
36
,
15|13
q
36
,
36
and E(T(36)).
2-3. Let
x+t
=
1
85t
+
3
105t
, for 0 t < 85. Calculate
20
p
x
,
20
q
x
,
20|10
q
x
,
20|
q
x
and
5
p
x+20
.
2-4. Given
t
p
x
=

1+x
1+x+t

3
, for t 0. Calculate E(T(x)) of a person aged x = 45.
2-5. Suppose that
x+t
is constant for 0 t < 1, and that q
x
= 0.16. Calculate the value of t for which
t
p
x
= 0.95.
2-6. Let (t) = 0.001 for 20 t 25. Calculate
2|2
q
20
.
2-7. (a) Prove that, for the expected value e
x
of the curtate future lifetime of (x), we have that e
x
= p
x
(1 +e
x+1
).
(b) Given the following table of values of e
x
:
Age x e
x
75 10.5
76 10.0
77 9.5
Calculate the probability that a life aged 75 will survive to age 77.
2-8. Suppose that
t
p
30
=
780070tt
2
7800
, for 0 t 60. Calculate q
50
and
50
.
2-9. (a) Assume that
x+u
is constant, for 0 < u < 1. Show that
u
p
x
= (p
x
)
u
.
(b) For the model in (a), suppose that q
x
= 0.420. Calculate the so-called central death rate m
x
, dened by
m
x
=
q
x

1
0
u
p
x
du
.
(c) (Challenging!) Try to nd, and justify, an interpretation of m
x
.
2-10. Let
x
= kx, for all x > 0, where k > 0 is a constant. Suppose that
10
p
35
= 0.81. Calculate
20
p
40
.
2-11. Calculate
20
p
x
, q
x
and
5|
q
x
according to the De Moivre model with w = 105. (Note: carefully specify these as
function of x, for all ages x that can be reached according to this model.)
2-12. Calculate the following probabilities, based on the life tables handed out in the lectures (and available on the
module webpage):
(a)
55
p
10
,
45
p
10+10
,
35
p
10+20
,
25
p
10+30
,
15
p
10+40
,
5
p
10+50
.
(b)
55
q
10
.
(c) q
10
, q
50
, q
90
.
(d)
20|10
q
10
,
20|10
q
50
.
(e)
40|
q
10
,
80|
q
10
,
40|
q
50
.
Briey discuss some of these probabilities.
2-13. Suppose that a lifetime model is dened in a life-table form, with l
x
= (121 x)
1/2
. Calculate the probability
that a life aged 21 will die after reaching age 40, but before reaching age 57.