Additivity properties for Value-at-Risk under Archimedean dependence and heavy-tailedness

Paul Embrechts, Johanna Neslehová and Mario V. Wüthrich

Insurance: Mathematics and Economics, 2009, vol. 44, issue 2, pages 164-169

Abstract: Mainly due to new capital adequacy standards for banking and insurance, an increased interest exists in the aggregation properties of risk measures like Value-at-Risk (VaR). We show how VaR can change from sub to superadditivity depending on the properties of the underlying model. Mainly, the switch from a finite to an infinite mean model gives a completely different asymptotic behaviour. Our main result proves a conjecture made in Barbe et al. [Barbe, P., Fougères, A.L., Genest, C., 2006. On the tail behavior of sums of dependent risks. ASTIN Bull. 36(2), 361-374].

Keywords: Value-at-Risk; Subadditivity; Dependence; structure; Archimedean; copula; Aggregation (search for similar items in EconPapers)
Date: 2009
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Persistent link: http://EconPapers.repec.org/RePEc:eee:insuma:v:44:y:2009:i:2:p:164-169

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