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Parameter estimation of a Levy copula of a discretely observed bivariate compound Poisson process with an application to operational risk modelling

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  • J. L. van Velsen

Abstract

A method is developed to estimate the parameters of a Levy copula of a discretely observed bivariate compound Poisson process without knowledge of common shocks. The method is tested in a small sample simulation study. Also, the method is applied to a real data set and a goodness of fit test is developed. With the methodology of this work, the Levy copula becomes a realistic tool of the advanced measurement approach of operational risk.

Suggested Citation

  • J. L. van Velsen, 2012. "Parameter estimation of a Levy copula of a discretely observed bivariate compound Poisson process with an application to operational risk modelling," Papers 1212.0092, arXiv.org.
    • Handle: RePEc:arx:papers:1212.0092
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    File URL: http://arxiv.org/pdf/1212.0092
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    References listed on IDEAS

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    1. Avanzi, Benjamin & Cassar, Luke C. & Wong, Bernard, 2011. "Modelling Dependence in Insurance Claims Processes with Lévy Copulas," ASTIN Bulletin, Cambridge University Press, vol. 41(2), pages 575-609, November.
    2. Jarque, Carlos M. & Bera, Anil K., 1980. "Efficient tests for normality, homoscedasticity and serial independence of regression residuals," Economics Letters, Elsevier, vol. 6(3), pages 255-259.
    3. Esmaeili, Habib & Klüppelberg, Claudia, 2010. "Parameter estimation of a bivariate compound Poisson process," Insurance: Mathematics and Economics, Elsevier, vol. 47(2), pages 224-233, October.
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    Cited by:

    1. R.L. Gudmundarson & M. Guerra & A. B. de Moura, 2021. "Minimizing Ruin Probability Under Dependencies for Insurance Pricing," Working Papers REM 2021/0193, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
    2. Ragnar Levy Gudmundarson & Manuel Guerra & Alexandra Bugalho de Moura, 2021. "Minimizing ruin probability under dependencies for insurance pricing," Papers 2108.10075, arXiv.org.

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