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| HAL : halshs-00706689, version 1 |
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| Aggregation of Market Risks using Pair-Copulas |
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| Dominique Guegan 1, 2Fatima Jouad 2, 3 |
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| (05/2012) |
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| The advent of the Internal Model Approval Process within Solvency II and the desirability of many insurance companies to gain approval has increased the importance of some topics such as risk aggregation in determining overall economic capital level. The most widely used approach for aggregating risks is the variance-covariance matrix approach. Although being a relatively well-known concept that is computationally convenient, linear correlations fail to model every particularity of the dependence pattern between risks. In this paper we apply different pair-copula models for aggregating market risks that represent usually an important part of an insurer risk profile. We then calculate the economic capital needed to withstand unexpected future losses and the associated diversification benefits. The economic capital will be determined by computing both 99.5th VaR and 99.5th ES following the requirements of Solvency II and SST. |
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| 1 : | Centre d'économie de la Sorbonne (CES) |
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CNRS : UMR8174 – Université Paris I - Panthéon-Sorbonne |
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| 2 : | Ecole d'Économie de Paris - Paris School of Economics (EEP-PSE) |
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Ecole d'Économie de Paris |
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| 3 : | AXA GRM |
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AXA Group Risk Management |
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| Axe Finance |
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| Discipline | : | Sciences de l'Homme et Société/Economies et finances Sciences de l'Homme et Société/Gestion et management Sciences de l'Homme et Société/Méthodes et statistiques Mathématiques/Probabilités Mathématiques/Statistiques Statistiques/Théorie |
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| Solvency II – risk aggregation – market risks – pair-copulas – economic capital – diversification gains. |
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| Liste des fichiers attachés à ce document : | |||||
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| halshs-00706689, version 1 | |
| http://halshs.archives-ouvertes.fr/halshs-00706689 | |
| oai:halshs.archives-ouvertes.fr:halshs-00706689 | |
| Contributeur : Lucie Label | |
| Soumis le : Lundi 11 Juin 2012, 12:33:49 | |
| Dernière modification le : Vendredi 15 Juin 2012, 16:59:50 | |
