Risk aggregation and capital allocation using a new generalized Archimedean copula

Fouad Marri and Khouzeima Moutanabbir

Insurance: Mathematics and Economics, 2022, vol. 102, issue C, 75-90

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 at risk (TVaR) and TVaR-based allocations, are derived.

Keywords: Bernstein copulas; Capital allocation; Copulas; Dependence; Value at risk; Tail value at risk (search for similar items in EconPapers)
JEL-codes: C02 C46 C51 C60 G22 G32 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:insuma:v:102:y:2022:i:c:p:75-90

DOI: 10.1016/j.insmatheco.2021.11.007

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