Investigators from Purdue University Zero in on Insurance Economics (Multiple risk factor dependence structures: Copulas and related properties)

Insurance Weekly News

By a News Reporter-Staff News Editor at Insurance Weekly News -- Fresh data on Economics - Insurance Economics are presented in a new report. According to news reporting out of West Lafayette, Indiana, by VerticalNews editors, research stated, "Copulas have become an important tool in the modern best practice Enterprise Risk Management, often supplanting other approaches to modelling stochastic dependence. However, choosing the 'right' copula is not an easy task, and the temptation to prefer a tractable rather than a meaningful candidate from the encompassing copulas toolbox is strong."

Funders for this research include Natural Sciences and Engineering Research Council, Government of Ontario, MITACS Canada.

Our news journalists obtained a quote from the research from Purdue University, "The ubiquitous applications of the Gaussian copula are just one illuminating example. Speaking generally, a 'good' copula should conform to the problem at hand, allow for asymmetry in the domain of definition and exhibit some extent of tail dependence. In this paper we introduce and study a new class of Multiple Risk Factor (MRF) copula functions, which we show are exactly such. Namely, the MRF copulas (1) arise from a number of meaningful default risk specifications with stochastic default barriers, (2) are in general non-exchangeable and (3) possess a variety of tail dependences."

According to the news editors, the research concluded: "That being said, the MRF copulas turn out to be surprisingly tractable analytically."

For more information on this research see: Multiple risk factor dependence structures: Copulas and related properties. Insurance Mathematics & Economics, 2017;74():109-121. Insurance Mathematics & Economics can be contacted at: Elsevier Science Bv, PO Box 211, 1000 Ae Amsterdam, Netherlands.

Our news journalists report that additional information may be obtained by contacting J.X. Su, Purdue University, Dept. of Stat, West Lafayette, IN 47907, United States.

Keywords for this news article include: West Lafayette, Indiana, United States, North and Central America, Insurance Economics, Economics, Risk and Prevention, Purdue University.