Choosing a random distribution with prescribed risks

Ignacio Cascos and Ilya Molchanov

Insurance: Mathematics and Economics, 2013, vol. 52, issue 3, 599-605

Abstract: We describe several simulation algorithms that yield random probability distributions with given values of risk measures. In case of vanilla risk measures, the algorithms involve combining and transforming random cumulative distribution functions or random Lorenz curves obtained by simulating rather general random probability distributions on the unit interval. A new algorithm based on the simulation of a weighted barycentres array is suggested to generate random probability distributions with a given value of the spectral risk measure.

Keywords: IM01; IE43; Risk measure; Random probability distribution; Simulation; Lorenz curve (search for similar items in EconPapers)
JEL-codes: C15 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:insuma:v:52:y:2013:i:3:p:599-605

DOI: 10.1016/j.insmatheco.2013.03.014

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