Correlation, co-dependency and risk aggregation [36]

Go to: Summary | Previous | Next   
Bullet points include: Copulas offer a conceptually simple yet rigorous approach to performing risk aggregation. Individual modelling exercises provide marginal. Knit them together using suitably chosen copula. But does require us to know the ‘right’ copula. Empirical estimation may help, but is likely to be less reliable in the tails. Because we are then estimating the form of the copula from only a small number of data points (if any)

Contents | Prev | Next | ERM Lecture Series

Desktop view | Switch to Mobile