You are reading a page from An Elementary Treatise on Actuarial Mathematics by Harry Freeman (1932)
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Term Life Insurance
CHAPTER V
CENTRAL DIFFERENCES




4

...............
...............
i) =ua-{-xAup+ x (x 0211_1
2!
+ [x (x I) + x (x — 1) (x — 2)]
    2!    3 !    3u
L    -1
    + [x (x—    3)' (x—2)+x(x— I)(4~ 2) (x—3),4u-1+...
L    x(x I)    (x+I)x I) J
    =up+x~up    2      02111      A3u_I
3•
+(x+ I)x(4~    1)(x—z) ('4U-2+A5u_2) +...,
since    xr + xr+1 = (x + 1),+I,
= u0 + xLuo + x2A2u_1 + (x + I)3 A3, u_1 + (x + 1)4 A4u_2 + .... This is known as the Gauss "forward" formula.
A variant of this method is to write the advancing difference formula in the form
xlr)    xlr+1)    (x + 1)(r+l)
xr+xr+1-(x+I)r+i, or r+    (Y+1)I
we have
ux = u3 + x'1!0 + ) (A2u_1 + A3u_1) + x( ))
2 1    (A3u_1 + A4u_1)
3 •

70    FINITE DIFFERENCES
whence, by writing A4u_1= A4u_2 + A5 u_2 and so on, Gauss's formula follows.
A proof similar to the above, in which the general term is evolved, and which depends upon the method of separation of symbols, will be found in J.I.A. vol. L, pp. 31, 32.
An alternative method of proof, depending on the basic formula for divided differences, follows the lines of the corresponding proof of Newton's formula for equal intervals. If on p. 61 we take arguments a, a + h, a — h, a + 2h, a — 2h, ... instead of a, a + h, a + 2h, a + 3h, ... and proceed to express the divided differences in terms of ordinary differences, Gauss's formula is at once obtained. This is seen more easily by writing down terms in the order u0, u1, u—1, u2, u_2, ... and taking out the leading divided differences.
If we write the terms of the series and their differences thus:

u—3
Au_3
A2 u_3
Au_2    A3u_3
u—1    A2u2    A4u—3
A11_1    6,3 u_2    A511_3
U0    A211_1    A4u_2
A1lo    A311_1    A511_2
ul    A2uo    A411_1
A111    A3110
U2    A2ul
Art2
u3
it will be seen that successive differences in the Gauss formula above lie along the zig-zag line indicated. For this reason the formula is often referred to as the "zig-zag" formula.
4. Stirling's formula.
If in Newton's formula we group the terms in a slightly different manner from that above, and use the relations



STIRLING'S FORMULA. BESSEL'S FORMULA
Alto = Du_1 + 02u_1
A2u0 = Q2u—1 + A3u—1;
.............................
03u_1 = 03u_2 + A4u_2 ..............................
we have
ux = u0 + x (Du_1 + A2u_1) + x2 \' 221_1 + 03u1)
+ x3 (A3u_1 + L\4u—1) + ...,
which, on substituting the single function (x + 1)r+1 for x,. + xr+1 and so on, becomes easily
ux = u0 + x0u_1 + (x + 1)2 O2u_i + (x + I)3 ',32_2
+ (x + 2)4 042_2 + ... .
This is another form of Gauss's formula—the "backward" form.
It should be noted that this is also a zig-zag formula. Here we take an upward step in the diagram from u0 and then proceed alternately, whereas in the forward formula the first step is downward.
Taking the mean of the two Gauss formulae we arrive at the
following expansion :
5. Bessel's formula.
Transforming the origin in the Gauss backward formula from o to — 1, we have
ux = u1 + (x — I) Auo + x (x I) Q2u x (x I) (x 2) 032 -1
2.    °    31
+ (x+    I)x (4~    1) (x—2)04u1+.... The mean of this and the forward formula is
ux = (uo + u1) + (x — Duo + x (2 I) 2 (A2u_1 + 02u0)+ ..., which is Bessel's formula.
z
ux = 2i0 + x (Au() + O2i _1) + 2 ~ A2 u_1 + x (x2 -      12) 2 (3Z1_1 + A3u_2) 1 +x2 (x2 12) 042—2 + x (x2 12) (x2 — 22) 2 (-SU—2 + 052_3)
41    51
+ x2 (x2 162 i (x2 22) Osu_3 + ... .
This is known as Stirling's formula.

72    FINITE DIFFERENCES
6. Everett's formula.
The Gauss forward formula with interval x and initial term v1 may be written
vx+l = v1 + xhv1 + x202v0 + (x + I)3 03v0 + (x + 1)4 A4v-1
+ (x + 2)5 A5v_1 + .
The backward formula with interval (x — I) and initial term v1 gives
vx = v1 + (x — I) t v0 + x202v0 + x,A3v_1 + (x + I),1 L4v-1
+ (x + I)5 05v_2 +;...
Subtract the second series from the first : then, since
vx+1 — vx = Lvx,
we have
Avx= xhv1+(x + 1)3 A3v0+(x + 2)505 v_I +...
— (x — I) Av0x303v_1 — (x + I)5 / 5v_2 — ....
Put ux, Dux, A2ux, ... for Avx, A2vx, A3vx, .... Then
ux=xu1+ (x + I)3A2u0+ (x+z)5A4u_1+...
(x — I) u0 — x302 u_I — (x + I)5 A4u_2 — ....
When x is less than unity a convenient form of this formula for interpolation between u0 and u1 is obtained by putting e = — x; thus
ux — xu1 + x      (x2 - 1)
A2uo + x (x2 5)I (x2 4)
A4u_1 +
3    ...
    + Suo + (e2      1) A2u_1 ,+     (e2       I)(2    4) A4u—2 + ...,
    3•    5I
the most common form of Everett's formula.
The above elegant proof is due to G. J. Lidstone (J.I.A. vol. ix, pp. 349—52). In his note on this formula Mr Lidstone shows how to obtain another formula similar to the above for interpolation between u_4. and ui . The mean of the two Gauss formulae is taken in the same
way, but x ; v0 and x ; v1 are used in place of x ; v1 and x— ; v1 respectively : the formula then becomes

SHEPPARD'S RULES    73
uD =uD+pe
2!      Duo-1(p2    4)     p2 4    4      )Osu—i+...

q2     Z      4 Du_, — (q2    44     1q2      L 3 u_2 — ... ,
where p = +xandq=—x.
This form is generally known as Everett's "second" formula; it is specially adapted for use in statistical work.
7. Sheppard's rules.
Dr W. F. Sheppard has laid down certain general principles for obtaining central difference formulae which are very simple in their application. By adopting a slightly different notation from the usual a difference table is constructed from which the formulae can be written down with little trouble. Thus :
Du_1 is denoted by (— I, o),    i 2u_1 is denoted by (— I, o, I),

(o, 1),    O2uo
(I, 2);    O2u1
(o, I, 2),
(I, 2, 3);
Luo Du1
03u_i is denoted by (— I, o, I, 2),
D3uo    o, I, 2, 3),
03ui    (I, 2, 3, 4) ;
and so on.
The difference table then becomes
x ux Dux A2ux
x_2 u—2    
    (2, I)  
x_1 u_1 (— I, o) (— 2, — 1, O)
xo u0 (0, I) (— I, 0, 1)
x1 u1   (O, I, 2)
    (I, 2)  
x2 U2    

The Newton advancing difference formula may be written
ux = uo + (x — x0) (o, I) '+ ' (x I x0) (x     2      xi) (O, I, 2) +(x—xo)(x—xi)(x—x2)(o,I,2,3)+...,
I    2    3
which is ux = uo + xzuo + x., t 2 u0 + x3 A3 u0 + x4 4 u0 + ... .

74    FINITE DIFFERENCES
Gauss's forward formula:
ux = Ito + (x — x0) (o, 1)    (x I xo) (x     2      x1) (— , o, 1)
+ (x I xo) (x     2      xi) (x     3x      t) (— I, O, I, 2) -Jr ... ,

orux=uo+x(o,i)+x2(—I,0,I)+(x+1)3(—I,0,I,2)+...
= uo + xAuo + x2A2u_I + (x + i)303u_1 + ....
The rules are


ADVANTAGES OF CENTRAL DIFFERENCE FORMULAE 75
The Gauss formula is
ux = u0 + x0u0 + x242u_1 + (x + 1)3 A3u_1 + (x + /r)4 A4u_2
+ (x + 2)5 A511_2 When x = .4 the successive coefficients are
•4; — •12; — •056; •0224; •010752
and to four decimal places the value of u.4 is 14.6430, which agrees with the tabulated value.
To apply the advancing difference formula we take 15 years as the origin and are required to find ux when x = 2.4.
In the formula
ux = u0 + xiu0 + x2A2u0 + x303uo + x4A4u0 + x5z 5u0
the coefficients are
2.4; 1.68; •224; — '0336; 010752.
On evaluating the expansion we obtain for u2.4 the value 14.6430 as above.
It will be seen that the two results are in agreement (as indeed they must be, since the same values of zi are used), and it may be asked therefore wherein lies the advantage of using the central difference formula. This question will be discussed in the next paragraph.

9. Consider an approximation to a particular value of ux based on, say, r values out of n available. The error in the approximation, as measured by the first neglected term, is least when the co-efficient of that term is least. It can be shown that this happens when the values of ux upon which the interpolation is based range round the space in which x falls, so that x is as nearly as possible central. The central difference formulae give a systematic method for building up the table subject to these conditions.
Again, the central difference coefficients are as a general rule smaller than those required for the calculations in the advancing difference formula (as will be seen in the Example) and, by a suit-able choice of origin, the arithmetical work may be reduced to a minimum.
It should be noted that, in the phrase " as measured by the first neglected term," this measure is not theoretically complete; it is how-

76    FINITE DIFFERENCES
ever generally sufficient in practice if the first neglected order of differences is constant or is changing but slowly. When this is not so it will not necessarily be true that a central difference formula beginning with uo is more accurate than the advancing difference formula beginning with the same term. [See p. 337 of Sheppard's Paper, cited below.]

10. Relative accuracy of the formulae.
The relative accuracy of the various central difference formulae can be investigated in an elementary manner on the following lines. The Gauss forward formula is
us = up + xzu, + x2021[_1 + (x + I)3 Asu_1 + (x + 1)4 A4u_2 + ... .
It is easy to show that if we expand us by Stirling's formula as far as a certain order of even differences we can obtain by a simple transformation the above formula to even differences. Similarly it can be proved that Bessel's formula and Gauss's formula are identical to odd differences. Now the Gauss formula involves only ordinary differences while the other two series involve differences of the form 2 (Anu,. + Anur.+1) : these may be called " mean" differences. If instead of proceeding to constant differences the series stop short at, say, rth differences—which are not constant—the use of any of the formulae will involve an error. It remains to examine which of these formulae gives the best result in different circum
The following demonstration is based on that given in greater detail by Mr D. C. Fraser in J.I.A. vol. L, p. 25.
Suppose that x is not greater than •5. Then, by calculating the coefficients in Gauss's formula, it will be found that for positive values of x none of the coefficients (except that multiplying ,duo) differs greatly from + .5 times the preceding coefficient. (See Table, J.I.A. vol. L, p. 25.) Thus the terms after that involving the third difference are approximately equal to
(x + I)4 (A4+ 205+...)11_2, i.e. to    (x + 1)4 . 2 0'4u-2 +
If therefore we substitute 2 (,4u_2 + A4u_1), the mean difference in line with u , for,4u_2 in Gauss's formula, we make the formula
approximately correct to fifth differences, without having to

RELATIVE ACCURACY OF THE FORMULAE    77
calculate the actual coefficient of the fifth difference. The subtherefore improves the accuracy of the formula.
When, however, the substitution is made, it will be found to reproduce Bessel's formula to the fourth mean difference. There-fore Bessel's formula to fourth mean differences is usually more accurate than Stirling's to the fourth difference.
It may be shown similarly that Stirling's formula to odd mean differences is more accurate than Bessel's to the same order of differences.
The above demonstration is only approximate : a strict investigation into the relative accuracy of central and advancing difference formulae requires rather more elaborate mathematical discussion. (See Whittaker and Robinson, Calculus of Observations, p. 49; Lidstone, T.F.A. vol. Ix, pp. 246-257; Fraser, J.LA. vol. L, pp. 25-27; Sheppard, Proceedings of the London Mathematical Society, vol. Iv, Parts 4, 5.)
Mr D. C. Fraser has given the following criteria summarising the properties of interpolation formulae:
78    FINITE DIFFERENCES
occur both in the "x" expansion and in the "6" expansion. An example will make this clear.
Example 2.
Given    x    30    35    40    45    50    55    6o
ux    771    862    Tool    1224    1572    2123    2983
obtain values for ux for all integral values of x between x 40 and x=50.

The difference table is
x ux
Dux
A2ux L.3ux L'uy
30
771
       
   
91
     
35
862
 
48
   
   
139
 
36
 
40
1001
 
84
 
5
   
223
 
41
 
45
1224
 
125
 
37
   
348
 
78
 
50
1572
 
203
 
z8
   
551
 
106
 
55
2123
 
309
   
   
86o
     
6o
2983
       

Everett's formula gives
ux=xul+(x+ 1)3 A2u0+(x+2)5/4u_1+...
+ euo + (S + 1)3 i12u_1 + (15 + 2)5 04u_2 + ..., also    ul+4 = 6u2 + (e + 1)3 A2 u1 + (e + 2)5 A4% + ...
+ xul + (x + I), A2u0 + (x + 2)5 0411_1 + ...,
and the second line in ul+ is the same as the first line in ux.
Since the data are given at quinquennial points and we require values at individual points, we may write x = •2, •4, •6, ... and 6 = •8, •6, •4, ... . The first line of u.2 will be the same as the second line for u1.8 and so on.
The coefficients of the terms in the first line of the formula for ux are, to fourth difference
,
 
•2    — •032    .006336
 
 
.4    — •056    •010752
 
 
•6    — •o64    •x11648
 
 
•8    — •048    .008064
 



x    xu x (x2    1) Ozuo x (xa - 1) (x$ - 4) Al u_1 Sum of
firstthree
terms
Sum of
second
three
Inter
polated
result
 
1
3 51
(ii) + (iii)
terms (v) + (vi)
(i)
(ii) (iii) (iv) + (iv)
(v)
(vi)
(vii)
-I
             
2
200.2
2'7
0.0
197'5
   
4
400'4
-4'7
0.1
395'8
   
•6
600.6
-5'4
0.1
595'3
   
•8
800.8 -4.0 0.0 796.8    
•2
244.8 -4.0
0'2
241.0
796'8
1037.8
•4
489'6
-7.0
0'4
483'0
595'3
1078'3
6
734'4
-8•o
0.4
726'8
395'8
1122.6
•8
979.2
-6•o
0.3
973'5
197'5
I171.0
2
314'4
- 6'5
0'2 308'1
973'5
1281'6
•4
6z8.8 -11.4 0.3
617'7
726.8 1344'5
.6
943'2
-13'0
0'3 930.5 483.0 1413.5
•8 j 1257.6 - 9.7 0.2 1248.1 241.0 1489.1

The only column which needs explanation is column (vi). This column represents the second set of three terms of the formula, correct to fourth central differences, and is obtained by writing down in the reverse order the values of the previous column applicable to the sum of the first three terms.
It should be mentioned that the values in column (vii) of the table do not quite agree with the tabular values: the tabular values are 1038, 1081, I122, I172, 1281, 1345, 1415, 1490. The reason for this is that the function upon which the original values depend is not a rational integral function of the independent variable and that therefore a formula based on finite differences is only an approximate representaof the function. The example is based on the rates of mortality according to the H" table, the data being 105 times the probability of dying in the year of age x.
12. Just as 0 = E - 1, or Dux = ux+1 - ux, similar symbolic identities may be deduced from the relations existing between ux, ux+i and ux_i. Dr Sheppard has introduced the following
notation, which is widely used by mathematicians:
(Sux = ux+7l - ux_i,
and    µux = (ux+4 + ux_i).
USE OF EVERETT'S FORMULA
The work is best arranged in tabular form, thus:

8o    FINITE DIFFERENCES
The relationships between E, 8 and are quite easy to establish. 8 - Ei — E-i_E-i[E — 1] -E-iA. :. 82n E-n A2n.
Also    µ . 2 (El + E-i),
and    µ8 = .4 (E — E-1) = (AE-1 + A),
µ82n+1    [E-(n-1) — E-(n+1)] A2n
(AE—1 + A) A2n I.—n
Again    2µ 2E1 — 8,
or    Ei    + 28.
By means of these symbols the central difference formulae can be written down in very convenient form. For example, Gauss's forward formula is    44
ux = 11° + x8ui + x282u0 + (x + 1)3 83ui + (x + 1)4 O4u° + ..., and Stirling's becomes
ux = 110 + xi8u0 + x282u0 + (x + I)3 i83u0 + ....
EXAMPLES 5
r. Apply a central difference formula to obtain u , given u20 = 14, 1124=32,u28=35,1132=40.
EXAMPLES    81
7. Find formulae true to third differences for the bisection of an interval
82    FINITE DIFFERENCES