Abstract
We describe a numerical procedure to obtain bounds on the distribution function of a sum of n dependent risks having fixed marginals. With respect to the existing literature, our method provides improved bounds and can be applied also to large non-homogeneous portfolios of risks. As an application, we compute the VaR-based minimum capital requirement for a portfolio of operational risk losses.
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Embrechts, P., Puccetti, G. Aggregating risk capital, with an application to operational risk. Geneva Risk Insur Rev 31, 71–90 (2006). https://doi.org/10.1007/s10713-006-0556-6
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DOI: https://doi.org/10.1007/s10713-006-0556-6
Keywords
- Risk aggregation
- Dependency bounds
- Operational risk
- Mass transportation duality theorem
- Global optimization