Risk aggregation and capital allocation using a new generalized Archimedean copula

Fouad Marri () and Khouzeima Moutanabbir
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Fouad Marri: INSEA - Institut National de Statistique et d’Economie Appliquée [Rabat]
Khouzeima Moutanabbir: UJ - University of Johannesburg [South Africa]

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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.

Keywords: Bernstein copulas; Capital allocation; Copulas; Dependence; Tail value at risk; Value-at-Risk (search for similar items in EconPapers)
Date: 2021-03-15
New Economics Papers: this item is included in nep-rmg
Note: View the original document on HAL open archive server: https://hal.science/hal-03169291
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