Journal article

Capturing non-exchangeable dependence in multivariate loss processes with nested Archimedean Levy copulas

Benjamin Avanzi, Jamie Tao, Bernard Wong, Xinda Yang

Annals of Actuarial Science | Cambridge University Press (CUP) | Published : 2016

Abstract

The class of spectrally positive Lévy processes is a frequent choice for modelling loss processes in areas such as insurance or operational risk. Dependence between such processes (e.g. between different lines of business) can be modelled with Lévy copulas. This approach is a parsimonious, efficient and flexible method which provides many of the advantages akin to distributional copulas for random variables. Literature on Lévy copulas seems to have primarily focussed on bivariate processes. When multivariate settings are considered, these usually exhibit an exchangeable dependence structure (whereby all subset of the processes have an identical marginal Lévy copula). In reality, losses are n..

View full abstract

University of Melbourne Researchers

Grants

Awarded by Australian Research Council


Funding Acknowledgements

The authors are grateful to anonymous reviewers for comments, as well as to colleagues who attended the 16th International Congress on Insurance: Mathematics and Economics in June 2012 in Hong Kong, and who provided useful insights about the fitting procedure. This research was supported under an Australian Actuarial Research Grant provided by the Actuaries Institute, as well as under Australian Research Council's Linkage Projects funding scheme (project number LP130100723). Jamie Tao acknowledges financial support from the Brian Gray (Honours) scholarship, provided by APRA and RBA. Xinda Yang acknowledges financial support from an Australian Postgraduate Award, as well as supplementary scholarships provided by the Australian School of Business, UNSW. The views expressed herein are those of the authors and are not necessarily those of the supporting organisations.