TY - JOUR
T1 - Asymptotic capital allocation based on the higher moment risk measure
AU - Chen, Yiqing
AU - Liu, Jiajun
N1 - Publisher Copyright:
© The Author(s), under exclusive licence to European Actuarial Journal Association 2024.
PY - 2024
Y1 - 2024
N2 - We investigate capital allocation based on the higher moment risk measure at a confidence level q∈(0,1). To reflect the excessive prudence of today’s regulatory frameworks in banking and insurance, we consider the extreme case with q↑1 and study the asymptotic behavior of capital allocation for heavy-tailed and asymptotically independent/dependent risks. Some explicit asymptotic formulas are derived, demonstrating that the capital allocated to a specific line is asymptotically proportional to the Value at Risk of the corresponding individual risk. In addition, some numerical studies are conducted to examine their accuracy.
AB - We investigate capital allocation based on the higher moment risk measure at a confidence level q∈(0,1). To reflect the excessive prudence of today’s regulatory frameworks in banking and insurance, we consider the extreme case with q↑1 and study the asymptotic behavior of capital allocation for heavy-tailed and asymptotically independent/dependent risks. Some explicit asymptotic formulas are derived, demonstrating that the capital allocated to a specific line is asymptotically proportional to the Value at Risk of the corresponding individual risk. In addition, some numerical studies are conducted to examine their accuracy.
KW - Asymptotic independence/dependence
KW - Capital allocation
KW - G22
KW - G32
KW - The higher moment risk measure
KW - Univariate/multivariate regular variation
UR - http://www.scopus.com/inward/record.url?scp=85188249225&partnerID=8YFLogxK
U2 - 10.1007/s13385-024-00378-4
DO - 10.1007/s13385-024-00378-4
M3 - Article
AN - SCOPUS:85188249225
SN - 2190-9733
JO - European Actuarial Journal
JF - European Actuarial Journal
ER -