On the integration of deterministic opinions into mortality smoothing and forecasting

Abstract

Abstract Modelling and forecasting mortality is a topic of crucial importance to actuaries and demographers. However, forecasts from the majority of mortality projection models are continuations of past trends seen in the data. As such, these models are unable to account for external opinions or expert judgement. In this work, we present a method for the incorporation of deterministic opinions into the smoothing and forecasting of mortality rates using constraints. Not only does our approach yield a smooth transition from the past into the future, but also, the shapes of the resulting forecasts are governed by a combination of the opinion inputs and the speed of improvements observed in the data. In addition, our approach offers the possibility to compute the amount of uncertainty around the projected mortality trends conditional on the opinion inputs, and this allows us to highlight some of the pitfalls of deterministic projection methods.