Economic Capital Allocations for Non-Negative Portfolios of Dependent Risks

Abstract

In this paper we explore the problem of economic capital allocations in the context of non-negative multivariate (insurance) risks possessing a dependence structure. We derive a general result and illustrate it with a number of useful examples. One such example, for instance, develops explicit expressions for the discussed economic capital decomposition rule when the underlying portfolio consists of dependent compound Poisson risks.

Keywords: Economic capital allocations, tail conditional expectation risk measure, multivariate non-negative dependent risks, multivariate Tweedie distributions, multivariate compound Poisson distributions