Pricing of Reverse Mortgage through Machine Learning: new opportunities for the actuaries

The Reverse Mortgage (RM) is the basis of financial or pension products where an house owner may use (a part or the totality of) such asset liquidation value to get an amount of money in the form of a lump sum or a series of recurring payments without selling it until his death. The quantification of the asset liquidation price risk is fundamental in the evaluation of the RM contract either in the perspective of the lender (insured) or in the one of the borrower (insurer). In this paper, a pricing formula that takes advantage of Artificial Machine to assess such risk is proposed.