Before revision: Using an extended version of the credit risk model CreditRisk^+ , we develop a flexible framework to estimate stochastic life tables and to model credit, life insurance and annuity portfolios , including actuarial reserves. Deaths are driven by common stochastic risk factors which may be interpreted as death causes like neoplasms, circulatory diseases or idiosyncratic components. Our approach provides an efficient, numerically stable algorithm for an exact calculation of the one-period loss distribution where various sources of risk are considered. As required by many regulators, we can then derive risk measures for the one-period loss distribution such as value at risk and expected shortfall.
After revision: Using an extended version of the credit risk model CreditRisk^+ , we develop a flexible framework to estimate stochastic life tables and to model credit, life insurance and annuity portfolios to derive P\&L distributions. Furthermore, the model allows exact (without Monte Carlo simulation error) calculation of risk measures and their sensitivities with respect to model parameters for P\&L distributions such as value-at-risk and expected shortfall.