Mortality Heterogeneity and Actuarial Fairness in China's Notional Defined Contribution Pension System

Battle Count: 73

The paper is primarily focused on pension system design, actuarial fairness, and public policy rather than financial markets or trading strategies. However, the mortality modeling techniques (Lee-Carter, Hermite splines, multi-population extensions) and longevity risk concepts have indirect relevance to longevity-linked securities, mortality derivatives, and insurance-linked instruments. The actuarial valuation framework and discount rate sensitivity analysis share methodological common ground with quantitative finance, but the paper does not address trading, portfolio construction, or market microstructure.

The methodology involves multiple stages: (1) fitting a standard Lee-Carter model to national data via Poisson MLE, (2) constructing LC-adjusted pooled CHARLS data, (3) fitting Hermite spline models with shape restrictions and non-crossover constraints, (4) computing actuarial present values of life annuities, (5) calibrating four different annuitization rules via constrained nonlinear optimization. The Hermite spline parameterization, shape restrictions, and constrained optimization for Methods 3 and 4 add significant complexity. Requires expertise in actuarial mathematics, mortality modeling, spline interpolation, and constrained optimization. However, the individual components are well-established in the literature.

National mortality data sourced from official Chinese yearbooks (publicly available). CHARLS data publicly available for registered users. Analysis code available from authors upon reasonable request but no public repository. Two-step estimation procedure and Hermite spline specifications are fully described. Discount rate (7%) and all parameter settings are explicitly stated. However, no code or data pipeline is publicly hosted, limiting full reproducibility.