Associate Professor Xiang Hu, a researcher of the Base, has published a collaborative paper titled "Multivariate distributions with time and cross-dependence: Aggregation and capital allocation" in ASTIN Bulletin: The Journal of the International Actuarial Association

Abstract:

This paper investigates risk aggregation and capital allocation problems for an insurance portfolio consisting of several lines of business. The class of multivariate INAR(1) processes is proposed to model different sources of dependence between the number of claims of the portfolio. The total capital required for the whole portfolio is evaluated under the TVaR risk measure, and the contribution of each line of business is derived under the TVaR-based allocation rule. We provide the risk aggregation and capital allocation formulas in the general case of continuous and strictly positive claim sizes and then in the case of mixed Erlang claim sizes. The impact of both time dependence and cross-dependence on the behavior of risk aggregation and capital allocation is numerically illustrated.

Key Words: Multivariate INAR(1) processes, time dependence, cross-dependence, risk aggregation, capital allocation 

Link: MULTIVARIATE DISTRIBUTIONS WITH TIME AND CROSS-DEPENDENCE: AGGREGATION AND CAPITAL ALLOCATION | ASTIN Bulletin: The Journal of the IAA | Cambridge Core

Teacher Profile

Xiang Hu is an associate professor at the School of Finance, Zhongnan University of Economics and Law, and Wenlan Young Scholar of Zhongnan University of Economics and Law. His research interests include Actuarial Insurance and Risk Management. He has published more than 20 papers in academic journals such as the Insurance: Mathematics and Economics, ASTIN Bulletin, Scandinavian Actuarial Journal, North American Actuarial Journal, Statistical Research Journal, Insurance Research Journal, etc. He has presided over and participated in many projects of National Natural Science Foundation of China and National Social Science Foundation of China.