Dependent risk models with Archimedean copulas: A computational strategy based on common mixtures and applications

Hélène Cossette, Etienne Marceau, Itre Mtalai and Déry Veilleux

Insurance: Mathematics and Economics, 2018, vol. 78, issue C, 53-71

Abstract: In this paper, we investigate dependent risk models in which the dependence structure is defined by an Archimedean copula. Using such a structure with specific marginals, we derive explicit expressions for the pdf of the aggregated risk and other related quantities. The common mixture representation of Archimedean copulas is at the basis of a computational strategy proposed to find exact or approximated values of the distribution of the sum of risks in a general setup. Such results are then used to investigate risk models in regard to aggregation, capital allocation and ruin problems. An extension to nested Archimedean copulas is also discussed.

Keywords: Archimedean copulas; Common mixture representation; Aggregation strategy; Risk measures; Capital allocation; Ruin theory; Nested Archimedean copulas (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:insuma:v:78:y:2018:i:c:p:53-71

DOI: 10.1016/j.insmatheco.2017.11.002

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