Risk aggregation and capital allocation using a new generalized Archimedean copula
Risk Management
2021-03-23 v1 Computational Finance
Portfolio Management
Pricing of Securities
Statistical Finance
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.
Cite
@article{arxiv.2103.10989,
title = {Risk aggregation and capital allocation using a new generalized Archimedean copula},
author = {Fouad Marri and Khouzeima Moutanabbir},
journal= {arXiv preprint arXiv:2103.10989},
year = {2021}
}