Bayesian inference for the parameters of mortality rate in the models of dependent lives with application in life insurance

Abstract

In this paper, the Bayesian inference of the model of dependent lives is considered. We use the bivariate Gompertz (BGP) distribution. This new bivariate survival model and its extension have recently been proposed by Shoaee and Khorram. This model is more flexible and can be applied in the actuarial science of life insurance, and reliability theory in competing risks and shock models. As we know, the maximum likelihood estimates do not always exist and therefore cannot always be calculated. So, the Bayesian estimations are considered using the squared error loss function and a priori distributions that create a dependency between the hyper-parameters. But given the assumptions, one can see that explicit expressions cannot be obtained for Bayesian estimations. The importance sampling method is proposed to calculate the Bayes estimations and also to create the corresponding HPD credible intervals of the unknown parameters. The Monte Carlo simulation studies and analysis of a real data set are also performed to evaluate the proposed method for estimating parameters. Finally, a generalization of the dependent lives models is presented and the Bayesian estimate for this new bivariate family distribution is introduced and a comparison is made between the models of this new family.

Keywords:

• Bayesian analysis
• dependent lives
• HPD credible interval
• mortality rate
• posterior distribution
• prior distribution

MATHEMATICS SUBJECT CLASSIFICATION:

• 62H10
• 62H12
• 62E15

Acknowledgments

The author is grateful to the editor, associate editor, and referees for constructive comments and suggestions which improved the article greatly.