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Czado, Claudia and Gschlößl, Susanne (2002): Modeling of transition intensities and probabilities in a German long term care portfolio with known diagnosis. Collaborative Research Center 386, Discussion Paper 302 [PDF, 445kB]


In this paper a semiparametric hazard model introduced by Cox (1972) is used to model transitions intensities for a long term care (LTC) data set. The main focus is the inclusion of the diagnoses which led to LTC as explanatory variables. Modern model diagnostic techniques are applied to check the model assumptions. Fractional Polynomials proposed by Royston and Altman (1994) are used to model the functional form of continuous covariates. Time dependency is examined graphically by using scaled Schoenfeld residuals (see Grambsch and Therneau(1994)). It is shown that the inclusion of diagnoses significantly improves the estimated transition probabilities on which premiums are based. As an alternative approach a piecewise exponential model is fitted and compared to the semiparametric hazard model.

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