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Proposition of a hybrid stochastic Lee-Carter mortality model

In the paper, a stochastic hybrid mortality model (EHLC) treated as a solution of stochastic differential equations is introduced. The model is defined analogously to the well-known Lee-Carter mortality model (LC). A parameter estimation procedure including a switching rule are proposed. A comparison of the predictive accuracy of the LC and EHLC models based on the mortality data for Poland has shown that the new model yields better results.