Need clarification on Viaticals - Chapter 74 of PWOQF2 (Volume 3)

amitbatra · January 18th, 2008, 7:34 pm

Can somebody elaborate what is written on page 1167 of Paul Wilmott on Quantitative Finance Second Edition Volume 3, Chapter 74 on Viaticals.Specifically, "To value this policy I have taken a published table of mortality.... ProbabilityOfDeath=ProbabilityOfDeath + Adjust1 + Adjust2*(Age-70)"Things were pretty well explained till this point, and suddenly I lost track.How would one make sure that the published data meets life expectancy (of 5.2y here).

amitbatra · January 22nd, 2008, 9:27 am

Ok, let me be more specific.There is a Life Expectancy certificate issued by ME (5.2 years in the example) as a median value, non-specifc to the person, and there are actuarial table that give out the function through whihc 'pdf' of age at death can be arrived at. What is the link between the two? And what is the "adjustment" all about?