Asymptotic capital allocation based on the higher moment risk measure

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.