Generating unfavourable VaR scenarios under Solvency II with patchwork copulas

The central idea of the paper is to present a general simple patchwork construction principle for multivariate copulas that create unfavourable VaR (i.e. Value at Risk) scenarios while maintaining given marginal distributions. This is of particular interest for the construction of Internal Models in...

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Autores principales:	Pfeifer Dietmar, Ragulina Olena
Formato:	article
Lenguaje:	EN
Publicado:	De Gruyter 2021
Materias:	solvency ii copulas patchwork copulas bernstein copulas monte carlo methods 62h05 62h12 62h17 11k45 Science (General) Q1-390 Mathematics QA1-939
Acceso en línea:	https://doaj.org/article/4b9e0080a72a4fb89a432960302ee97c
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spelling	oai:doaj.org-article:4b9e0080a72a4fb89a432960302ee97c2021-12-05T14:10:46ZGenerating unfavourable VaR scenarios under Solvency II with patchwork copulas2300-229810.1515/demo-2021-0115https://doaj.org/article/4b9e0080a72a4fb89a432960302ee97c2021-10-01T00:00:00Zhttps://doi.org/10.1515/demo-2021-0115https://doaj.org/toc/2300-2298The central idea of the paper is to present a general simple patchwork construction principle for multivariate copulas that create unfavourable VaR (i.e. Value at Risk) scenarios while maintaining given marginal distributions. This is of particular interest for the construction of Internal Models in the insurance industry under Solvency II in the European Union. Besides this, the Delegated Regulation by the European Commission requires all insurance companies under supervision to consider different risk scenarios in their risk management system for the company’s own risk assessment. Since it is unreasonable to assume that the potential worst case scenario will materialize in the company, we think that a modelling of various unfavourable scenarios as described in this paper is likewise appropriate. Our explicit copula approach can be considered as a special case of ordinal sums, which in two dimensions even leads to the technically worst VaR scenario.Pfeifer DietmarRagulina OlenaDe Gruyterarticlesolvency iicopulaspatchwork copulasbernstein copulasmonte carlo methods62h0562h1262h1711k45Science (General)Q1-390MathematicsQA1-939ENDependence Modeling, Vol 9, Iss 1, Pp 327-346 (2021)
institution	DOAJ
collection	DOAJ
language	EN
topic	solvency ii copulas patchwork copulas bernstein copulas monte carlo methods 62h05 62h12 62h17 11k45 Science (General) Q1-390 Mathematics QA1-939
spellingShingle	solvency ii copulas patchwork copulas bernstein copulas monte carlo methods 62h05 62h12 62h17 11k45 Science (General) Q1-390 Mathematics QA1-939 Pfeifer Dietmar Ragulina Olena Generating unfavourable VaR scenarios under Solvency II with patchwork copulas
description	The central idea of the paper is to present a general simple patchwork construction principle for multivariate copulas that create unfavourable VaR (i.e. Value at Risk) scenarios while maintaining given marginal distributions. This is of particular interest for the construction of Internal Models in the insurance industry under Solvency II in the European Union. Besides this, the Delegated Regulation by the European Commission requires all insurance companies under supervision to consider different risk scenarios in their risk management system for the company’s own risk assessment. Since it is unreasonable to assume that the potential worst case scenario will materialize in the company, we think that a modelling of various unfavourable scenarios as described in this paper is likewise appropriate. Our explicit copula approach can be considered as a special case of ordinal sums, which in two dimensions even leads to the technically worst VaR scenario.
format	article
author	Pfeifer Dietmar Ragulina Olena
author_facet	Pfeifer Dietmar Ragulina Olena
author_sort	Pfeifer Dietmar
title	Generating unfavourable VaR scenarios under Solvency II with patchwork copulas
title_short	Generating unfavourable VaR scenarios under Solvency II with patchwork copulas
title_full	Generating unfavourable VaR scenarios under Solvency II with patchwork copulas
title_fullStr	Generating unfavourable VaR scenarios under Solvency II with patchwork copulas
title_full_unstemmed	Generating unfavourable VaR scenarios under Solvency II with patchwork copulas
title_sort	generating unfavourable var scenarios under solvency ii with patchwork copulas
publisher	De Gruyter
publishDate	2021
url	https://doaj.org/article/4b9e0080a72a4fb89a432960302ee97c
work_keys_str_mv	AT pfeiferdietmar generatingunfavourablevarscenariosundersolvencyiiwithpatchworkcopulas AT ragulinaolena generatingunfavourablevarscenariosundersolvencyiiwithpatchworkcopulas
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Generating unfavourable VaR scenarios under Solvency II with patchwork copulas

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