Graduation

(Nov 28, 2012)

Graduation is the process whereby smooth mortality rates are created from crude mortality rates.  Smoothness is an important part of graduation, but another is the extrapolation of mortality rates to ages at which data may be unreliable or even non-existent.  An example would be pension-fund work where reliable mortality-experience data might be available up to age 100, but where actuaries required mortality rates up to age 120 (say) for the purposes of calculating pension reserves.  An illustration of this dual smoothing and extrapolation is given in Figure 1.

Figure 1. log(mortality) by age for males in United States of America.  Crude rates shown for ages 20-100, together with graduated rates outside…

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Tags: graduation, extrapolation by age, smoothing, splines

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