Economics - Research Publications
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ItemModelling Mortality Dependence: An Application of Dynamic Vine CopulaZhou, R ; Ji, M (Elsevier, 2021)Vine copula, constructed from bivariate copulas, provides great exibility in modelling complex high-dimensional dependence. When applied to multi- population mortality modelling, vine copula yields signi_cant improvement over traditional multivariate copulas. In this paper, we propose to capture time- varying features in mortality dependence with dynamic regular vine (R-vine) copula which is built from bivariate copulas with time-varying dependence pa- rameters. We develop two dependence dynamics for R-vine copulas and illustrate the selection and estimation of dynamic R-vine copulas using mortality data from eight populations. The estimated R-vine copulas using the proposed dependence dynamics are shown to yield better goodness of _t than both static and regime- switching vine copulas. We further demonstrate the simulation of mortality paths using dynamic R-vine copulas and examine the impact of vine copula choice on the assessed e_ectiveness of longevity hedge.
ItemThe Boundary of the Market for Biosecurity RiskStoneham, G ; Hester, SM ; Li, JS-H ; Zhou, R ; Chaudhry, A (WILEY, 2020-10-30)Imported goods create value in destination countries but also create biosecurity risk. Although widely used in other domains of the economy, risk markets have not been created to manage losses that occur when exotic pests and diseases are introduced with traded goods. In this article we show that not all biosecurity risks are insurable. Losses arising from effort needed to detect and respond to exotic pests and diseases that breach national borders appear to be insurable because entry of these threats and consequent response costs, can be regarded as random events. As pests and diseases establish and spread, however, loss of access to export markets and productivity losses display systematic risk and appear to be uninsurable. Other insurability criteria support this definition of the boundary of biosecurity risk markets. We use the Australian biosecurity system as an example, although the framework described in this study will be applicable to biosecurity systems worldwide. We argue that biosecurity risk insurance could be incorporated into the current biosecurity system but would require legislation mandating importers to purchase insurance. Advantages of actuarial pricing of biosecurity risk are: (i) an increase in economic efficiency to the extent that importers respond to the price of biosecurity risk; (ii) financial sustainability would improve because actuarial pricing creates a structural link between funds available for biosecurity activities and risk exposure; and (iii) equity issues evident in the current biosecurity system could be addressed because risk creators (importers) would fund response activities through the purchase of insurance.
ItemDrivers of Mortality Dynamics: Identifying Age/Period/Cohort Components of Historical U.S. Mortality ImprovementsLi, JS-H ; Zhou, R ; Liu, Y ; Graziani, G ; Hall, D ; Haid, J ; Peterson, A ; Pinzur, L (Taylor & Francis (Routledge), 2020)The goal of this paper is to obtain an Age/Period/Cohort (A/P/C) decomposition of historical U.S. mortality improvement. Two different routes to achieving this goal are considered. In the first route, the desired components are obtained by fitting an A/P/C model directly to historical mortality improvement rates. In the second route, an A/P/C model is estimated to historical crude death rates and the desired components are then obtained by differencing the estimated model parameters. For each route, various possible A/P/C model structures are experimented, and are evaluated on the basis of their robustness to several factors (e.g., changes in the calibration window) and their ability to explain historical changes in mortality improvement. Based on the evaluation results, an A/P/C decomposition for each gender is recommended. The decomposition will be examined in a follow-up project, in which the linkages between the A/P/C components and certain intrinsic factors will be identified.