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Impact of correlation crises in risk theory

Author

Listed:
  • Romain Biard

    (SAF - Laboratoire de Sciences Actuarielle et Financière - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon)

  • Claude Lefèvre

    (ULB - Département de Mathématique [Bruxelles] - ULB - Faculté des Sciences [Bruxelles] - ULB - Université libre de Bruxelles)

  • Stéphane Loisel

    (SAF - Laboratoire de Sciences Actuarielle et Financière - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon)

Abstract

In the renewal risk model, several strong hypotheses may be found too restrictive to model accurately the complex evolution of the reserves of an insurance company. In the case where claim sizes are heavy-tailed, we relax independence and stationarity assumptions and extend some asymptotic results on finite-time ruin probabilities, to take into account possible correlation crises like the one recently bred by the sub-prime crisis: claim amounts, in general assumed to be independent, may suddenly become strongly positively dependent. The impact of dependence and non-stationarity is analyzed and several concrete examples are given.

Suggested Citation

  • Romain Biard & Claude Lefèvre & Stéphane Loisel, 2008. "Impact of correlation crises in risk theory," Post-Print hal-00308782, HAL.
    • Handle: RePEc:hal:journl:hal-00308782
    Note: View the original document on HAL open archive server: https://hal.science/hal-00308782
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    References listed on IDEAS

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    1. Alink, Stan & Lowe, Matthias & V. Wuthrich, Mario, 2004. "Diversification of aggregate dependent risks," Insurance: Mathematics and Economics, Elsevier, vol. 35(1), pages 77-95, August.
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    5. Cossette, Helene & Marceau, Etienne, 2000. "The discrete-time risk model with correlated classes of business," Insurance: Mathematics and Economics, Elsevier, vol. 26(2-3), pages 133-149, May.
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    Citations

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    Cited by:

    1. Claude Lefèvre & Stéphane Loisel, 2009. "Finite-Time Ruin Probabilities for Discrete, Possibly Dependent, Claim Severities," Methodology and Computing in Applied Probability, Springer, vol. 11(3), pages 425-441, September.
    2. Loisel, Stéphane & Milhaud, Xavier, 2011. "From deterministic to stochastic surrender risk models: Impact of correlation crises on economic capital," European Journal of Operational Research, Elsevier, vol. 214(2), pages 348-357, October.
    3. Loisel, Stéphane & Mazza, Christian & Rullière, Didier, 2009. "Convergence and asymptotic variance of bootstrapped finite-time ruin probabilities with partly shifted risk processes," Insurance: Mathematics and Economics, Elsevier, vol. 45(3), pages 374-381, December.
    4. Romain Biard & Stéphane Loisel & Claudio Macci & Noel Veraverbeke, 2010. "Asymptotic behavior of the finite-time expected time-integrated negative part of some risk processes and optimal reserve allocation," Post-Print hal-00372525, HAL.
    5. Xiaohu Li & Jintang Wu & Jinsen Zhuang, 2015. "Asymptotic Multivariate Finite-time Ruin Probability with Statistically Dependent Heavy-tailed Claims," Methodology and Computing in Applied Probability, Springer, vol. 17(2), pages 463-477, June.
    6. Chen, Yiqing & Yuen, Kam C., 2012. "Precise large deviations of aggregate claims in a size-dependent renewal risk model," Insurance: Mathematics and Economics, Elsevier, vol. 51(2), pages 457-461.
    7. Florin Avram & Romain Biard & Christophe Dutang & Stéphane Loisel & Landy Rabehasaina, 2014. "A survey of some recent results on Risk Theory," Post-Print hal-01616178, HAL.
    8. Romain Biard, 2013. "Asymptotic multivariate finite-time ruin probabilities with heavy-tailed claim amounts: Impact of dependence and optimal reserve allocation," Post-Print hal-00538571, HAL.
    9. Geoffrey Nichil & Pierre Vallois, 2019. "Solvency Need Resulting from Reserving Risk in a ORSA Context," Methodology and Computing in Applied Probability, Springer, vol. 21(2), pages 567-592, June.

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