Risk aggregation and Extreme Events [64]

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Bullet points include: Copulas not necessarily so helpful when managing risks Aggregate fat-tailed characteristics depend on ‘fat-tailed’ (i.e. non-Normal) characteristics of both copula and marginals simultaneously Ultimately, management involves deciding whether and how to change a portfolio of risks, from e.g. x = (x1, …, xn)T to y = (y1, …, yn)T And involves trading-off risk versus reward Here focus on: How to combine copula and marginals visually Impact of fat-tails on portfolio construction

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