European Actuarial Journal

, Volume 3, Issue 2, pp 439–452 | Cite as

Some remarks on capital allocation by percentile layer

Original Research Paper

Abstract

Capital allocation by percentile layer is a relatively new method. There is a claim that this method will generate different capital allocations than three other popular methods: CoVaR, Alternative CoVaR and CoTVAR methods. It is also claimed that capital allocation by percentile allocates more capital to catastrophic perils that will cause more severe losses. We study these four methods formally. We show neither of the two claims holds in general. The results of this paper will provide actuaries and other financial risk analysts with valuable insights into capital allocation by percentile layer.

Keywords

Capital allocation Percentile layer CoVaR  Alternative CoVaR CoTVaR VaR-dependence 

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Copyright information

© DAV / DGVFM 2013

Authors and Affiliations

  1. 1.Department of MathematicsRobert Morris UniversityMoon TownshipUSA

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