One way to formulate a multivariate probability distribution with dependent univariate margins distributed gamma is by using the closure under convolutions property. This direction yields an additive background risk model, and it has been very well-studied. An alternative way to accomplish the...

We demonstrate both analytically and numerically that the existing methods for measuring tail dependence in copulas may sometimes underestimate the extent of extreme co-movements of dependent risks and, therefore, may not always comply with the new paradigm of prudent risk management. This...

We introduce a class of dependence structures, that we call the Multiple Risk Factor (MRF) dependence structures. On the one hand, the new constructions extend the popular CreditRisk approach, and as such they formally describe default risk portfolios exposed to an arbitrary number of fatal risk...

Tail dependence refers to clustering of extreme events. In the context of financial risk management, the clustering of high-severity risks has a devastating effect on the well-being of firms and is thus of pivotal importance in risk analysis.When it comes to quantifying the extent of tail...

Risk capital allocations (RCAs) are an important tool in quantitative risk management, where they are utilized to, e.g., gauge the profitability of distinct business units, determine the price of a new product, and conduct the marginal economic capital analysis. Nevertheless, the notion of RCA...

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...

The prominence of the Euler allocation rule (EAR) is rooted in the fact that it is the only return on risk-adjusted capital (RORAC) compatible capital allocation rule. When the total regulatory capital is set using the value-at-risk (VaR), the EAR becomes -- using a statistical term -- the...

One way to formulate a multivariate probability distribution with dependent univariate margins distributed gamma is by using the closure under convolutions property. This direction yields an additive background risk model, and it has been very well-studied. An alternative way to accomplish the...

We demonstrate both analytically and numerically that the existing methods for measuring tail dependence in copulas may sometimes underestimate the extent of extreme co-movements of dependent risks and, therefore, may not always comply with the new paradigm of prudent risk management. This...