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http://hdl.handle.net/2445/108253
Title: | Risk aggregation in Solvency II through recursive log-normals |
Author: | Bolviken, Erik Guillén, Montserrat |
Keywords: | Risc (Economia) Correlació (Estadística) Risc (Assegurances) Simetria (Matemàtica) Dependència (Estadística) Distribució (Teoria de la probabilitat) Risk Correlation (Statistics) Risk (Insurance) Symmetry (Mathematics) Dependence (Statistics) Distribution (Probability theory) |
Issue Date: | Mar-2017 |
Publisher: | Elsevier B.V. |
Abstract: | It is argued that the accuracy of risk aggregation in Solvency II can be improved by updating skewness recursively. A simple scheme based on the log-normal distribution is developed and shown to be superior to the standard formula and to adjustments of the Cornish-Fisher type. The method handles tail-dependence if a simple Monte Carlo step is included. A hierarchical Clayton copula is constructed and used to confirm the accuracy of the log-normal approximation and to demonstrate the importance of including tail-dependence. Arguably a log-normal scheme makes the logic in Solvency II consistent, but many other distributions might be used as vehicle, a topic that may deserve further study. |
Note: | Versió postprint del document publicat a: https://doi.org/10.1016/j.insmatheco.2016.12.006 |
It is part of: | Insurance Mathematics and Economics, 2017, vol. 73, p. 20-26 |
URI: | http://hdl.handle.net/2445/108253 |
Related resource: | https://doi.org/10.1016/j.insmatheco.2016.12.006 |
ISSN: | 0167-6687 |
Appears in Collections: | Articles publicats en revistes (Econometria, Estadística i Economia Aplicada) |
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