ERM-101-12: Measurement and Modeling of Dependencies in Economic Capital


#1

A Fellowship Forums Wiki Community Post

Online Link to this Reading: https://www.actuaries.org.uk/system/files/documents/pdf/sm20100510.pdf

Key Takeaways:

  • Correlation as the Simplest Type of Dependency

    • Dependency Structures
    • What do we mean by Dependency?
    • Pearson Correlation Coefficient
    • Spearman Coefficient
    • Kendall Tau Correlation
    • Numerical Example
  • Risk Aggregation

    • Risk Aggregation Framework
    • Risk Aggregation Methodologies
    • Simple Summation
    • Fixed Diversification Percentage
    • Variance-Covariance Matrix
    • Copulas
    • Causal Modelling
    • Natural Catastrophe vs Reinsurance Credit Risk Aggregation

ERM-101-12: Measurement and Modelling of Dependencies in Economic Capital, Ch.3