Correlation, co-dependency and risk aggregation [10]

Go to: Summary | Previous | Next   
Bullet points include: Sources of future uncertainty known mathematically as ‘innovations’. There may be too few (non-normal) innovations to approach limit. Or just a small number (perhaps just one) may predominate. Or may become increasingly non-normal in the limit. Innovations may not be time stationary. Very important source in practice, see Kemp (2010). Innovations may not have finite standard deviations (or means!). Impact of innovations may not respect usual mathematical axioms we might expect to apply to (portfolio) valuations

Contents | Prev | Next | ERM Lecture Series

Desktop view | Switch to Mobile