EconPapers    
Economics at your fingertips  
 

The calculation of Solvency Capital Requirement using Copulas

Marco Pellecchia and Giovambattista Perciaccante

MPRA Paper from University Library of Munich, Germany

Abstract: Our aim is to present an alternative methodology to the standard formula imposed to the insurance regulation (the European directive knows as Solvency II) for the calculus of the capital requirements. We want to demonstrate how this formula is now obsolete and how is possible to obtain lower capital requirement through the theory of the copulas, function that are gaining increasing importance in various economic areas. A lower capital requirement involves the advantage for the various insurance companies not to have unproductive capital that can therefore be used for the production of further profits. Indeed the standard formula is adequate only with some particular assumptions, otherwise it can overestimate the capital requirements that are actually needed as the standard formula underestimates the effect of diversification.

Keywords: Solvency II; Solvency Capital Requirement; Standard Formula; Value-at-Risk; Copula. (search for similar items in EconPapers)
JEL-codes: C13 C15 C18 C61 (search for similar items in EconPapers)
Date: 2019-05-01
New Economics Papers: this item is included in nep-ias and nep-rmg
References: Add references at CitEc
Citations:

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/94213/1/MPRA_paper_94213.pdf original version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:94213

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter (winter@lmu.de).

 
Page updated 2024-12-28
Handle: RePEc:pra:mprapa:94213