Abstract
In this paper, we investigate risk aggregation and capital allocation problems for a portfolio of possibly dependent risks whose multivariate distribution is defined with the Farlie–Gumbel–Morgenstern copula and mixed Erlang distribution marginals. In such a context, we first show that the aggregate claim amount has a mixed Erlang distribution. Based on a top-down approach, closed-form expressions for the contribution of each risk are derived using the TVaR and covariance rules. These findings are illustrated with numerical examples.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have