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Risk aggregation and capital allocation using a new generalized Archimedean copula

Author

Listed:
  • Fouad Marri
  • Khouzeima Moutanabbir
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.

Suggested Citation

  • Fouad Marri & Khouzeima Moutanabbir, 2021. "Risk aggregation and capital allocation using a new generalized Archimedean copula," Papers 2103.10989, arXiv.org.
    • Handle: RePEc:arx:papers:2103.10989
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    References listed on IDEAS

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    Cited by:

    1. Blier-Wong, Christopher & Cossette, Hélène & Marceau, Etienne, 2023. "Risk aggregation with FGM copulas," Insurance: Mathematics and Economics, Elsevier, vol. 111(C), pages 102-120.

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