Information Matrix

Another week, another giant financial institution comes crashing down.  This time it is the turn of HBOS, a large UK mortgage provider.  The problem was not one of leverage as such, since all banks are highly leveraged.

In an earlier post questioning whether we still need standard tables, we used the AIC to choose between models.

The recent bankruptcy filing for Lehman Brothers follows hard on the heels of the forced takeover of Bear Stearns earlier this year. Debt played a role in the demise of both: as with many banks and other businesses, they used borrowed money to enhance shareholder returns, a phenomenon known as leverage.

 The survival curve is simply the proportion of lives surviving to each age

Senators Barack Obama and John McCain are now the confirmed candidates for their respective parties in the forthcoming US presidential election.  Much comment on Senator McCain surrounds his age (72 as at 29th August 2008), against that of Senator Obama (47, as at 4th August 2008).

Following a previous entry on postcodes, we have been asked how US zip codes can be used for mortality modelling.

A phenomenon to watch for is that of the "self-prophesying model".  It occurs when a variable is too specific to the mortality experience of a reference portfolio to have wider application. 

A tool often used by demographers is the distribution of age at death in a population.  This is known to actuaries as the curve of deaths, and the past 170 years have seen a rather remarkable transformation in this curve. 

 Every good statistician knows that correlation does not imply causation.  Just because two things appear linked does not mean they are. However, with historical data we often don't have the luxury of carrying out controlled, scientific experiments to see if A really does cause B.

Liabilities within any given portfolio are rarely equal, and they usually differ widely in size. Typically, a large proportion of liabilities is concentrated in a relatively small number of lives, so this should always be checked.