A Bayesian multivariate risk-neutral method for pricing reverse mortgages
Date of Issue2014
College of Business (Nanyang Business School)
In this article, we propose a Bayesian multivariate framework to price reverse mortgages that involve several risks in both insurance and financial sectors (e.g., mortality rates, interest rates, and house prices). Our method is a multivariate extension of the Bayesian risk-neutral method developed by Kogure and Kurachi. We apply the proposed method to Japanese data to examine the possibility for a successful introduction of reverse mortgages into Japan. The results suggest a promising future for this new market.
North American Actuarial Journal
© 2014 Society of Actuaries. This is the author created version of a work that has been peer reviewed and accepted for publication by North American Actuarial Journal, Society of Actuaries. It incorporates referee’s comments but changes resulting from the publishing process, such as copyediting, structural formatting, may not be reflected in this document. The published version is available at: [http://dx.doi.org/10.1080/10920277.2013.872983].