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Involving copula functions in Conditional Tail Expectation

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  • Brahim Brahimi

Abstract

Our goal in this paper is to propose an alternative risk measure which takes into account the fluctuations of losses and possible correlations between random variables. This new notion of risk measures, that we call Copula Conditional Tail Expectation describes the expected amount of risk that can be experienced given that a potential bivariate risk exceeds a bivariate threshold value, and provides an important measure for right-tail risk. An application to real financial data is given.

Suggested Citation

  • Brahim Brahimi, 2012. "Involving copula functions in Conditional Tail Expectation," Papers 1205.4345, arXiv.org, revised Apr 2014.
  • Handle: RePEc:arx:papers:1205.4345
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    1. repec:sae:ecolab:v:16:y:2006:i:2:p:1-2 is not listed on IDEAS
    2. Wang, Shaun, 1996. "Ordering of risks under PH-transforms," Insurance: Mathematics and Economics, Elsevier, vol. 18(2), pages 109-114, July.
    3. Wang, Shaun S. & Young, Virginia R. & Panjer, Harry H., 1997. "Axiomatic characterization of insurance prices," Insurance: Mathematics and Economics, Elsevier, vol. 21(2), pages 173-183, November.
    4. Philippe Artzner & Freddy Delbaen & Jean-Marc Eber & David Heath, 1999. "Coherent Measures of Risk," Mathematical Finance, Wiley Blackwell, vol. 9(3), pages 203-228.
    5. Nikolay Nenovsky & S. Statev, 2006. "Introduction," Post-Print halshs-00260898, HAL.
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