Study Results from University of Cantabria Update Understanding of Insurance Economics (Risk aggregation in multivariate dependent Pareto…

Study Results from University of Cantabria Update Understanding of Insurance Economics (Risk aggregation in multivariate dependent Pareto distributions)

By a News Reporter-Staff News Editor at Insurance Weekly News -- New research on Economics - Insurance Economics is the subject of a report. According to news reporting out of Santander, Spain, by VerticalNews editors, research stated, "In this paper we obtain closed expressions for the probability distribution function of aggregated risks with multivariate dependent Pareto distributions. We work with the dependent multivariate Pareto type II proposed by Arnold (1983, 2015), which is widely used in insurance and risk analysis."

Financial support for this research came from Fundacion Banco Santander.

Our news journalists obtained a quote from the research from the University of Cantabria, "We begin with an individual risk model, where the probability density function corresponds to a second kind beta distribution, obtaining the VaR, TVaR and several other tail risk measures. Then, we consider a collective risk model based on dependence, where several general properties are studied. We study in detail some relevant collective models with Poisson, negative binomial and logarithmic distributions as primary distributions. In the collective Pareto-Poisson model, the probability density function is a function of the Kummer confluent hypergeometric function, and the density of the Pareto-negative binomial is a function of the Gauss hypergeometric function."

According to the news editors, the research concluded: "Using data based on one-year vehicle insurance policies taken out in 2004-2005 (Jong and Heller, 2008) we conclude that our collective dependent models outperform other collective models considered in the actuarial literature in terms of AIC and CAIC statistics."

For more information on this research see: Risk aggregation in multivariate dependent Pareto distributions. Insurance Mathematics & Economics, 2016;71():154-163. 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.M. Sarabia, University of Cantabria, Dept. of Econ, E-39005 Santander, Spain. Additional authors for this research include E. Gomez-Deniz, F. Prieto and V. Jorda.

Keywords for this news article include: Santander, Spain, Europe, Insurance Economics, Economics, University of Cantabria.

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