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DISCUSSION PAPER PI-0801

Mortality Density Forecasts: An Analysis of Six Stochastic Mortality Models

Andrew J.G. Cairns, David Blake, Kevin Dowd, Guy D. Coughlan, David Epstein and Marwa Khalaf-Allah

This paper develops a framework for developing forecasts of future mortality rates. We discuss the
suitability of six stochastic mortality models for forecasting future mortality and estimating the density of mortality rates at different ages. In particular, the models are assessed individually with reference to the following qualitative criteria that focus on the plausibility of their forecasts: biological reasonableness; the plausibility of predicted levels of uncertainty in forecasts at different ages; and the robustness of the forecasts relative to the sample period used to fit the model. An important, though unsurprising, conclusion is that a good fit to historical data does not guarantee sensible forecasts. We also discuss the issue of model risk, common to many modelling situations in demography and elsewhere. We find that even for those models satisfying our qualitative criteria, there are significant differences among central forecasts of mortality rates at different ages and among the distributions surrounding those central forecasts.

Key words:- Plausibility, Fan charts, Model risk, Forecasting, Model selection criteria