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Tail Comonotonicity and Conservative Risk Measures

Published online by Cambridge University Press:  09 August 2013

Lei Hua  and
Harry Joe
Harry Joe
Affiliation:
Department of Statistics, The University of British Columbia, Vancouver, BC, Canada, V6T1Z4, E-Mail: [email protected]
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Abstract

Tail comonotonicity, or asymptotic full dependence, is proposed as a reasonable conservative dependence structure for modeling dependent risks. Some sufficient conditions have been obtained to justify the conservativity of tail comonotonicity. Simulation studies also suggest that, by using tail comonotonicity, one does not lose too much accuracy but gain reasonable conservative risk measures, especially when considering high scenario risks. A copula model with tail comonotonicity is applied to an auto insurance dataset. Particular models for tail comonotonicity for loss data can be based on the BB2 and BB3 copula families and their multivariate extensions.

Keywords

Dependence modelingcopulaArchimedean copulaasymptotic full dependenceconditional tail expectationLaplace transformregular variation
Type
Research Article
Information
ASTIN Bulletin: The Journal of the IAA , Volume 42 , Issue 2 , November 2012 , pp. 601 - 629
Copyright
Copyright © International Actuarial Association 2012

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