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Aggregation

In: Risk Management in Banks and Insurance Companies

Author

Listed:
  • Anja Blatter

    (Nürtingen-Geislingen University of Applied Sciences)

  • Sean Bradbury

    (Nürtingen-Geislingen University of Applied Sciences)

  • Pascal Bruhn

    (Nürtingen-Geislingen University of Applied Sciences)

  • Dietmar Ernst

    (Nürtingen-Geislingen University of Applied Sciences)

Abstract

Determining the risk capital for a financial institution, the risk measure for an overall portfolio must be calculated. Therefore, aggregation methods have to be considered. There are various popular concepts to aggregate risks. First, the concept of the variance–covariance matrix is explained. After that the concept of copulas is introduced. The advantage of copulas is that also extreme events can be modeled—a phenomenon that can often be observed in financial practice and is therefore highly relevant. Based on these dependencies, an aggregate risk capital can be determined.

Suggested Citation

  • Anja Blatter & Sean Bradbury & Pascal Bruhn & Dietmar Ernst, 2024. "Aggregation," Springer Texts in Business and Economics, in: Risk Management in Banks and Insurance Companies, chapter 0, pages 183-209, Springer.
    • Handle: RePEc:spr:sptchp:978-3-031-42836-4_6
    DOI: 10.1007/978-3-031-42836-4_6
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