Targino, RS;
Peters, GW;
Shevchenko, PV;
(2015)
Sequential Monte Carlo Samplers for capital allocation under copula-dependent risk models.
Insurance: Mathematics and Economics
, 61
206 - 226.
10.1016/j.insmatheco.2015.01.007.
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Abstract
In this paper we assume a multivariate risk model has been developed for a portfolio and its capital derived as a homogeneous risk measure. The Euler (or gradient) principle, then, states that the capital to be allocated to each component of the portfolio has to be calculated as an expectation conditional to a rare event, which can be challenging to evaluate in practice. We exploit the copula-dependence within the portfolio risks to design a Sequential Monte Carlo Samplers based estimate to the marginal conditional expectations involved in the problem, showing its efficiency through a series of computational examples.
| Type: | Article |
|---|---|
| Title: | Sequential Monte Carlo Samplers for capital allocation under copula-dependent risk models |
| Open access status: | An open access version is available from UCL Discovery |
| DOI: | 10.1016/j.insmatheco.2015.01.007 |
| Publisher version: | http://dx.doi.org/10.1016/j.insmatheco.2015.01.007 |
| Additional information: | Copyright © 2015 Elsevier B.V. All rights reserved. |
| Keywords: | Risk management; Capital allocation; Sequential Monte Carlo (SMC); Copula models; Euler allocation. |
| UCL classification: | UCL UCL > Provost and Vice Provost Offices > UCL BEAMS UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Maths and Physical Sciences UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Maths and Physical Sciences > Dept of Statistical Science |
| URI: | https://discovery.ucl.ac.uk/id/eprint/1460851 |
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