Joint and Survivor Annuity Valuation with a Bivariate Reinforced Urn Process, 27 July 2020

Using a Bi-variate Reinforced Urn Process (B-RUP), a novel way of modeling the dependence of coupled lifetimes is introduced, with application to the pricing of joint and survivor annuities. In line with the machine learning paradigm, the model is able to improve its performances over time, but it also allows for the use of a priori information, like for example experts’ judgement, to complement the empirical data. Using a well-known Canadian data set, the performances of the B-RUP are studied and compared with the existing literature.