The Effect of Turkısh Mortalıty Improvements on the Cost of Annuıtıes Usıng Entropy Measure

Abstract

Over the twentieth century there have been unprecedented and unexpected gradual decline in mortality rates due to process of eliminating hazards to survival, which have increased the life expectancy at birth remarkably. Decrease in mortality rates often been underestimated by annuity and pension providers.In this thesis, the Keyfitz definition of entropy is used to measure the effect of any changes in the force of mortality on the cost of a life annuity. Entropy parameters investigated to see how they affect the entropy measure. Firstly, Turkish period life tables are used to calculate the entropy measure for the cost of annuities. Then a mathematical model for the force of mortality is adopted to obtain a more theoretically satisfactory conclusion.This master thesis is comprised of 5 chapters; introduction, entropy in actuarial science, entropy values using Turkish life tables, entropy values and its behavior using a mathematical model and finally results and conclusions.