Forward transition rates
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Forward transition rates. / Buchardt, Kristian; Furrer, Christian; Steffensen, Mogens.
I: Finance and Stochastics, Bind 23, Nr. 4, 2019, s. 975-999.Publikation: Bidrag til tidsskrift › Tidsskriftartikel › Forskning › fagfællebedømt
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TY - JOUR
T1 - Forward transition rates
AU - Buchardt, Kristian
AU - Furrer, Christian
AU - Steffensen, Mogens
PY - 2019
Y1 - 2019
N2 - The idea of forward rates stems from interest rate theory. It has natural connotations to transition rates in multi-state models. The generalisation from the forward mortality rate in a survival model to multi-state models is non-trivial and several definitions have been proposed. We establish a theoretical framework for the discussion of forward rates. Furthermore, we provide a novel definition with its own logic and merits and compare it with the proposals in the literature. The definition turns the Kolmogorov forward equations inside out by interchanging the transition probabilities with the transition intensities as the object to be calculated.
AB - The idea of forward rates stems from interest rate theory. It has natural connotations to transition rates in multi-state models. The generalisation from the forward mortality rate in a survival model to multi-state models is non-trivial and several definitions have been proposed. We establish a theoretical framework for the discussion of forward rates. Furthermore, we provide a novel definition with its own logic and merits and compare it with the proposals in the literature. The definition turns the Kolmogorov forward equations inside out by interchanging the transition probabilities with the transition intensities as the object to be calculated.
KW - Doubly stochastic Markov models
KW - Forward rates
KW - Kolmogorov forward equations
KW - Life insurance
UR - http://www.scopus.com/inward/record.url?scp=85067413180&partnerID=8YFLogxK
U2 - 10.1007/s00780-019-00397-0
DO - 10.1007/s00780-019-00397-0
M3 - Journal article
AN - SCOPUS:85067413180
VL - 23
SP - 975
EP - 999
JO - Finance and Stochastics
JF - Finance and Stochastics
SN - 0949-2984
IS - 4
ER -
ID: 230390128