Fuzzy formulation of the Lee–Carter model for mortality forecasting

Abstract

In this paper, a fuzzy formulation of the Lee–Carter [Lee, R.D., Carter, L.R., 1992. Modeling and forecasting U.S. mortality. J. Amer. Statist. Assoc. 419 (87), 659–675] model is proposed. The standard Lee–Carter (LC) model, which uses singular value decomposition, assumes that the errors have a constant variance over all ages. This statement, however, does not often hold. The advantage of such a fuzzy approach is that the errors are viewed as fuzziness of the model structure; hence the homoscedasticity is not an issue.