Copula-Based Multivariate Models with Applications to Risk Management and Insurance

27 Pages Posted: 12 Sep 2005

See all articles by Marco Bee

Marco Bee

University of Trento - Department of Economics and Management

Date Written: September 2005

Abstract

The purpose of this paper consists in analysing the relevance of dependence concepts in finance, insurance and risk management, exploring how these concepts can be implemented in a statistical model via copula functions and pointing out some difficulties related to this methodology. In particular, we first review the statistical models currently used in the actuarial and financial fields when dealing with loss data; then we show, by means of two risk management applications, that copula-based models are very flexible but sometimes difficult to set up and to estimate; finally we study, by means of a simulation experiment, the properties of the maximum likelihood estimators of the Gaussian and Gumbel copula.

Keywords: Copula, Tail dependence, Loss model, Portfolio model

JEL Classification: C15, C51, C63

Suggested Citation

Bee, Marco, Copula-Based Multivariate Models with Applications to Risk Management and Insurance (September 2005). Available at SSRN: https://ssrn.com/abstract=795964 or http://dx.doi.org/10.2139/ssrn.795964

Marco Bee (Contact Author)

University of Trento - Department of Economics and Management ( email )

Via Inama 5
I-38122 Trento
Italy
+39-0461-282296 (Phone)
+39-0461-282222 (Fax)

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