Generating VaR Scenarios under Solvency II with Product Beta Distributions

Dietmar Pfeifer and Olena Ragulina
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Dietmar Pfeifer: School of Mathematics and Science, Institute of Mathematics, Carl von Ossietzky Universität Oldenburg, D-26111 Oldenburg, Germany
Olena Ragulina: Department of Probability Theory, Statistics and Actuarial Mathematics, Taras Shevchenko National University of Kyiv, 64 Volodymyrska Str., 01601 Kyiv, Ukraine

Risks, 2018, vol. 6, issue 4, 1-15

Abstract: We propose a Monte Carlo simulation method to generate stress tests by VaR scenarios under Solvency II for dependent risks on the basis of observed data. This is of particular interest for the construction of Internal Models. The approach is based on former work on partition-of-unity copulas, however with a direct scenario estimation of the joint density by product beta distributions after a suitable transformation of the original data.

Keywords: Solvency II; multivariate density estimation; product beta distributions; VaR estimates (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:gam:jrisks:v:6:y:2018:i:4:p:122-:d:176564

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