Helllo
Althoug not technically a QF question, I was wondering whether someone can help my anyways. The Lee Carter model is a stochastic mortality model.
Usually, one models the central death rates as follows:
$\log(m(x,t)) = a(x) + b(x)\kappa(t) +\varepsilon(x,t)$
In the past, I have also seen that instead of $m(x,t)$ the formula is applied to the probability of dying within one year denoted by $q$:
$\log(q(x,t)) = a(x) + b(x)\kappa(t) +\varepsilon(x,t)$.
Usually, one uses/assumes one of the following relationships:
$q(x,t)=\frac{m(x,t)}{(1+\frac{1}{2}m(x,t))}$ or $q(x,t)=1-\exp(-m(x,t))$.
I am wondering which model approach is more appropriate? That is, to model $m(x,t)$ or $q(x,t)$ with the above approach? And why?
Thanks a lot,