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Multivariate Hawkes process for cyber insurance

Published online by Cambridge University Press:  17 June 2020

Yannick Bessy-Roland ,
Alexandre Boumezoued Open the ORCID record for Alexandre Boumezoued [Opens in a new window]  and
Caroline Hillairet
Yannick Bessy-Roland
Affiliation:
Milliman R&D, 14 Avenue de la Grande Armée, 75017Paris, France
Alexandre Boumezoued*
Affiliation:
Milliman R&D, 14 Avenue de la Grande Armée, 75017Paris, France
Caroline Hillairet
Affiliation:
CREST, UMR CNRS 9194, Ensae Paris, Avenue Henry Le Chatelier, 91120Palaiseau, France
*
*Corresponding author. E-mail: [email protected]
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Abstract

In this paper, we propose a multivariate Hawkes framework for modelling and predicting cyber attacks frequency. The inference is based on a public data set containing features of data breaches targeting the US industry. As a main output of this paper, we demonstrate the ability of Hawkes models to capture self-excitation and interactions of data breaches depending on their type and targets. In this setting, we detail prediction results providing the full joint distribution of future cyber attacks times of occurrence. In addition, we show that a non-instantaneous excitation in the multivariate Hawkes model, which is not the classical framework of the exponential kernel, better fits with our data. In an insurance framework, this study allows to determine quantiles for number of attacks, useful for an internal model, as well as the frequency component for a data breach guarantee.

Keywords

Hawkes processCyber riskData breachesClusteringLasso inferencePredictionThinning algorithm
Type
Paper
Information
Annals of Actuarial Science , Volume 15 , Issue 1 , March 2021 , pp. 14 - 39
Copyright
© Institute and Faculty of Actuaries 2020

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