Resolution and recovery

As we suggested earlier, unresolved (existing) cases (E) tend to resolve into recovery rather than death. The table below shows this clearly.  Between 28 February and 1 March, there were 79 deaths in Hubei, but 5,133 recoveries. By the same token, the apparent fatality rate also falls.

Place Date C D R E D/(D+R)
Hubei 28-Feb-20 65,914 2,682 26,403 36,829 9.22%
Hubei 29-Feb-20 66,337 2,727 28,930 34,680 8.61%
Hubei 01-Mar-20 66,907 2,761 31,536 32,610 8.05%

Note again that the percentage of cases is small compared to the population. The population of Hubei is about the same as the UK. So about 1 in 1,000 have been diagnosed with the disease since it began.  Only because of draconian isolation measures, however, which is why the impact on the economy is so severe.

Conflicting data

The table below shows, for 28 February 2020, the diagnosed cases (C), deaths (D), and recoveries (R) from 25 parts of China. Data from John Hopkins University.

The usual caveats apply. 

The last three columns are a function of the primary data. Existing cases (E) is C-(D+R), i.e. diagnosed cases less resolved cases. D/(D+R) is one method for estimating the case fatality ratio. E/C is the unresolved cases divided by diagnosed cases. This ratio will fall to zero over time given that all cases will resolve into recoveries or deaths. The table is sorted by this number.

As is evident, the fatality ratio varies wildly, from Jiangxi, where 790 out of 935 cases have already been resolved, with only one death, to Hubei where little more than half the 65,914 cases have been resolved, with a 9.22% apparent fatality ratio.

Time series analysis (not shown here) suggests that unresolved cases (E) tend to resolve into recovery rather than death, hence there is a moderately strong correlation (0.6) between E and apparent fatality.

There is no explanation yet of why cases should have taken so long to resolve in Hubei, which the media call the epicentre of the outbreak. Note also, as before, that the cases in Hubei are a tiny fraction of its population.

In other news, manufacturing activity in China in February plunged faster than during the 2008 financial crisis.

Place Date C D R E D/(D+R) E/C
Qinghai 28-Feb-20 18 0 18 0 0.00% 0%
Gansu 28-Feb-20 91 2 82 7 2.38% 8%
Yunnan 28-Feb-20 174 2 156 16 1.27% 9%
Henan 28-Feb-20 1,272 20 1,112 140 1.77% 11%
Hebei 28-Feb-20 318 6 277 35 2.12% 11%
Jiangxi 28-Feb-20 935 1 790 144 0.13% 15%
Shanghai 28-Feb-20 337 3 279 55 1.06% 16%
Anhui 28-Feb-20 990 6 821 163 0.73% 16%
Hunan 28-Feb-20 1,017 4 830 183 0.48% 18%
Shanxi 28-Feb-20 133 0 109 24 0.00% 18%
Shaanxi 28-Feb-20 245 1 199 45 0.50% 18%
Jiangsu 28-Feb-20 631 0 515 116 0.00% 18%
Zhejiang 28-Feb-20 1,205 1 975 229 0.10% 19%
Fujian 28-Feb-20 296 1 235 60 0.42% 20%
Jilin 28-Feb-20 93 1 73 19 1.35% 20%
Guizhou 28-Feb-20 146 2 112 32 1.75% 22%
Liaoning 28-Feb-20 121 1 93 27 1.06% 22%
Tianjin 28-Feb-20 136 3 102 31 2.86% 23%
Xinjiang 28-Feb-20 76 3 52 21 5.45% 28%
Chongqing 28-Feb-20 576 6 402 168 1.47% 29%
Beijing 28-Feb-20 410 7 257 146 2.65% 36%
Sichuan 28-Feb-20 538 3 338 197 0.88% 37%
Shandong 28-Feb-20 756 6 405 345 1.46% 46%
Hubei 28-Feb-20 65,914 2,682 26,403 36,829 9.22% 56%

 

Grim distribution

The table below is from Worldometers, based on a paper by the Chinese CCDC released on February 17 and published in the Chinese Journal of Epidemiology1

I would treat all such statistics with caution, but here they are anyway.

AGE DEATH RATE
80+ years old 14.8%
70-79 years old 8.0%
60-69 years old 3.6%
50-59 years old 1.3%
40-49 years old 0.4%
30-39 years old 0.2%
20-29 years old 0.2%
10-19 years old 0.2%
0-9 years old 0.0%

Death Rate is number of deaths divided by number of known cases of Coronavirus, but we still don’t know the ratio of known to unknown cases.

Grim reaper mathematics

The reporting of the corona virus outbreak makes almost no sense to Eumaeus – so he won’t comment.

But this site has some helpful statistics and explanations, and this paper published 7 February outlines the methodology for estimating case fatality rate, as well as (v important) the flaws inherent in the models used to estimate it.  See also this paper on a much earlier epidemic, which discusses many of the same problems.

One problem is to estimate the number of cases, particularly difficult when the disease may never show any symptoms. Dividing the number of deaths by the number of reported cases, i.e. those where the patient had symptoms, reported them and was correctly diagnosed, may grossly overestimate the fatality rate. General insurance actuaries may compare this to IBNR.

There is also the problem that if the disease is prolonged, there may be many cases where the outcome is not known, hence the correct method is to divide deaths by the number of cases reported days or weeks ago, where the ‘days or weeks’ is given by some estimate (again, another estimate) of the period from diagnosis to outcome.

[edit] See also the DXY site , a platform run by members of the Chinese medical community, aggregating media and government reports giving COVID-19 cumulative cases in near real-time.

CBDX – A Workhorse Mortality Model

(Mortality geeks only)

David Blake, Andrew Cairns and yours truly have just finished an article outlining a new(ish) mortality, model, CBDX. The purpose of the model is to offer a workhorse model that spans middle age as well as old age.

To recap: our original Cairns-Blake-Dowd (CBD) mortality model was specifically designed to capture the mortality behaviour of older people, e.g., people over 50. We were thinking of annuitants but equally it could apply to equity release borrowers, who must be at least 55.

Our original model had only two period (or passage of time) effects, the second of which enters the model through a coefficient that is a linear function of age. We then generalised then it to a CBD family consisting of 3 related models: M5, which is equivalent to a reconfigured CBD; M6, which is M5 plus a cohort (year of birth) effect; and M7, which is M6 plus a further period effect, which enters the model through a coefficient that is a quadratic function of age. More details on these models can be found here.

In subsequent work we discovered (to our surprise) that M7 performed robustly well across a number of different data sets. We had not expected a model with a quadratic function to perform as well as it did.

However, these models do not tend to perform well over age ranges that include younger ages. So one would not use the CBD family for, say, a model of a DC pension started at a youngish age. Andrew, David and I have long felt the need to remedy that limitation.

Continue reading “CBDX – A Workhorse Mortality Model”

Quids in

Kevin writes here

It also gets interesting if the firms use different valuation approaches from each other. In that case it would be theoretically possible for both parties to post a profit on the transaction or for both parties to post a loss on it.

He is referring to the approaches used to value the embedded put option in the ERM, and the actual put option used to hedge the ERM.

There is a troubling reminder here of what happened to AIG Financial Products in the run-up to the last financial crisis.

Continue reading “Quids in”

A Few Loose Ends

Anyone with the intestinal fortitude to wade through our Eumaeus Guide might have noticed that in several places in the report we promised to post two spreadsheets: one giving the calculations underlying our volatility chapter, Chapter 10, and the other the hedging example discussed in the Appendix to Chapter 20.
So why didn’t we post them as promised when we published the report?
Simple: because we, er, forgot. Sorry.

So here (1) they are (2), and see also our new models page

A word of explanation about these spreadsheets.

Continue reading “A Few Loose Ends”

Yet more from the postbag – Leland toft model, covered bonds

A busy day at the Post Office. K9.dogs is still intrigued by our earlier suggestion that the illiquidity premium is only c.5bps. Could we have a blog on that? Indeed, but that will have to wait until next week. Illiquidity premia require patience (unless you are an insurance company).

Max LikeyHood (sic) at maximumlikeyhood@gmail.com asks if we can make our implementation of the Bank’s structural model available. Yes, in the interests of transparency, public disclosure etc, here it is. The usual disclaimers apply – at your own risk, no representation is made etc. There is an additional bonus in that we have included the Basel IRB model at the bottom. Any questions, please ask in the usual way.

And keep up with the weird email addresses!

 

Brownian dilapidation

Source: Aviva

(Geeks only). Thanks to T Pocock for pointing out this amazing page of data on Aviva ERM securitisations, some of them dating back to 2001. Lots of stuff to dig out or back out, including data on NNEG claims. The chart above shows cumulative NNEG claims on ERF4, which was set up in 2004.

No surprise at first. Most ERMs start with a loan to value of lower than 50%, and property prices have gone up in most areas of the UK since 2004, so it takes a few years for the compound loan amount to reach current property value and reach NNEG territory.

But there is a real surprise in store.

Continue reading “Brownian dilapidation”