An Upper Bound of the Sum of Risks: two Applications of Comonotonicity
AbstractThis paper discusses the method of comonotonicity to estimate the sum of risks. Two applications are presented. First, we estimate a property insurer.s exposure to claims after a severe storm. Second, we apply our approach to a pension fund.s investment risk to estimate the prospective total assets and the conditional prospective funding rate. Both applications show that comonotonicity can be a useful tool to assess the upper bound for the risk exposure of financial institutions.
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Bibliographic InfoPaper provided by Netherlands Central Bank, Research Department in its series DNB Working Papers with number 105.
Date of creation: Jun 2006
Date of revision:
estimate; sum of risks; investment;
Find related papers by JEL classification:
- C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
- G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
- G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-07-09 (All new papers)
- NEP-BEC-2006-07-09 (Business Economics)
- NEP-FIN-2006-07-09 (Finance)
- NEP-FMK-2006-07-09 (Financial Markets)
- NEP-RMG-2006-07-09 (Risk Management)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Dhaene, J. & Denuit, M. & Goovaerts, M. J. & Kaas, R. & Vyncke, D., 2002. "The concept of comonotonicity in actuarial science and finance: theory," Insurance: Mathematics and Economics, Elsevier, vol. 31(1), pages 3-33, August.
- Vanduffel, Steven & Dhaene, Jan & Goovaerts, Marc, 2005. "On the evaluation of plans," Journal of Pension Economics and Finance, Cambridge University Press, vol. 4(01), pages 17-30, March.
- J. Dhaene & S. Vanduffel & M. J. Goovaerts & R. Kaas & D. Vyncke, 2005. "Comonotonic Approximations for Optimal Portfolio Selection Problems," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 72(2), pages 253-300.
- Dhaene, J. & Denuit, M. & Goovaerts, M. J. & Kaas, R. & Vyncke, D., 2002. "The concept of comonotonicity in actuarial science and finance: applications," Insurance: Mathematics and Economics, Elsevier, vol. 31(2), pages 133-161, October.
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