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.
Aggregating risk capital, with an application to operational risk / P. Embrechts, G. Puccetti. - In: THE GENEVA RISK AND INSURANCE REVIEW. - ISSN 1554-964X. - 31:2(2006), pp. 71-90. [10.1007/s10713-006-0556-6]
Aggregating risk capital, with an application to operational risk
G. Puccetti
2006
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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