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Risk aggregation and capital allocation using a new generalized Archimedean copula

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  • Fouad Marri

    (INSEA - Institut National de Statistique et d’Economie Appliquée [Rabat])

  • Khouzeima Moutanabbir

    (UJ - University of Johannesburg [South Africa])

Abstract

In this paper, we address risk aggregation and capital allocation problems in the presence of dependence between risks. The dependence structure is defined by a mixed Bernstein copula which represents a generalization of the well-known Archimedean copulas. Using this new copula, the probability density function and the cumulative distribution function of the aggregate risk are obtained. Then, closed-form expressions for basic risk measures, such as tail value-atrisk (TVaR) and TVaR-based allocations, are derived.

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  • Fouad Marri & Khouzeima Moutanabbir, 2021. "Risk aggregation and capital allocation using a new generalized Archimedean copula," Working Papers hal-03169291, HAL.
    • Handle: RePEc:hal:wpaper:hal-03169291
    Note: View the original document on HAL open archive server: https://hal.science/hal-03169291
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    References listed on IDEAS

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    Cited by:

    1. Blier-Wong, Christopher & Cossette, Hélène & Marceau, Etienne, 2023. "Risk aggregation with FGM copulas," Insurance: Mathematics and Economics, Elsevier, vol. 111(C), pages 102-120.

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    More about this item

    Keywords

    Bernstein copulas; Capital allocation; Copulas; Dependence; Tail value at risk; Value-at-Risk;
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