Professional Documents
Culture Documents
Copula
No Pain, No Gain!
i
e-Thesys (98 )
Copula
copula
(Capital at Risk)
(Solvency
II)
copula
ii
e-Thesys (98 )
Copula
Abstract
under the risk-based capital (RBC) approach can neither reflect the real risks faced by
property and casualty insurance companies (P & C insurance companies), nor take
into account the effect of correlation structure among the risk factors. In order to
realize the effect of correlation structure on capital adequacy, this study applies
different types of copulas and Capital at Risk to estimate the required economic
capitals of P & C insurance companies under varied confidence levels. The results
show that there exists great and nonlinear tail correlation among risks of P & C
insurance companies.
Solvency II advocates is used, the capital requirements calculated under this method
will be lower than the capitals required under the prevalent RBC approach.
It
represents the current capital supervision used in Taiwan may be too conservative for
capital requirements of P & C companies.
Copula
........................................................................................................... 1
................................................................................ 1
........................................................................................... 4
................................................................................................... 5
..................................................... 5
Copula ...................................................13
..................................................................................................15
......................................................................................15
Copula ......................................................................................16
...................................................................21
..................................................................................................24
...................................................................................24
..........................................................................................25
...............................................................................28
..........................................................................................31
..............................................................................................34
..........................................................................................34
...................................................................................35
.................................................................................................................37
...............................................................42
...........................................................43
...............................................................44
...........................................................45
iv
e-Thesys (98 )
Copula
1.1 ..................................................................................................... 4
3.1 ( K =Gaussian) ......................................................16
3.2 Frchet-Hoeffding copula ...............................................................18
v
e-Thesys (98 )
Copula
( 1997 2000
2007 )( 2001 911 2005
2009 )
()
1
1976
2
1992
20 3
(
2002Klein 1995) 2003
1
2
3
2005 11
18 09402526590
2009 1 17
09802500572
1976 7 17 17862
1992 9 23 811764493
1
e-Thesys (98 )
Copula
Klein (1995)
(nonlinear dependencies)
Eling and Toplek (2009)(lower-capitalized)
(well-capitalized)(ruin
probability)
(RBC ratio)
200%
Basel II (internal model-based
approach)(advanced measurement approach) 2010
2
e-Thesys (98 )
Copula
J. P. Morgan 1994
(Capital at Risk)
(model risk)
(copula)
copula
Jorion (2007)
3
e-Thesys (98 )
Copula
copula
(RBC ratio)
Copula
Gaussian copula
Students t
Clayton copula
1.1
4
e-Thesys (98 )
Copula
1990
(initial minimum net worth requirement)(continuing net worth
minimum requirement) 1992 20
1997
1970
5
e-Thesys (98 )
Copula
1980
8 2.1
9
10
( 2003)
11
2.1
1968 1998
143
22%
86
36
40
22
26
28
44
44
169
13%
6%
6%
3%
4%
4%
7%
7%
26%
638
100%
Swiss Re (2000)
11
2001 7 9 9000134140
2007 7 18 09600091711
2008 1 9 09602551847
6
e-Thesys (98 )
9
Copula
1996 2004
12
2008 4 24 09702502031
7
e-Thesys (98 )
Copula
()
1.
2.
(asset risk, C1 )
3.
(insurance risk, C 2 )
4.
5.
(business risk, C 4 )
(
)()(
)()(
)
13
(authorized control level RBC, RBC ACL )
( 2001Kopcke 1996)14
13
14
(2001)C1 C 3 C 2
C 0 C 4
8
e-Thesys (98 )
Copula
(1)
()
1.
2.
3.
4.
(credit risk, R3 )
5.
(reserving risk, R 4 )
6.
R1 R5
R 0
15
15
9
e-Thesys (98 )
Copula
(2)
()
RBC ratio =
(TAC )
( RBC ACL )
(3)
2.2
RBC ratio
200%
200% 150%
150% 100%
100% 70%
70%
200% 250%
(trend test)
RBC
()
16
10
e-Thesys (98 )
Copula
1.
Meister
(1998)
2.
17
11
e-Thesys (98 )
Copula
3.
(1994)
4.
( 1998Cummins, Harrington,
and Niehaus 1993Shepheard-Walwyn and Litterman 1998OConnor,
Golden, and Reck 1999)
12
e-Thesys (98 )
Copula
2010
copula
Copula
(linear dependencies)
copula
(parametric VaR
Gaussian VaR) 95%
Rosenberg
and Schuermann (2006) 1994 2002 17
copula
(expected shortfall)
(business mix)copula
13
e-Thesys (98 )
Copula
copula copula
copula
Prescribed 18
(short tail)(long tail)
Prescribed
(one size fits all)
He and Gong (2009)
(hazard rate)19(bottom-up)
20 copula
(Conditional Value at Risk, CVaR)
18
19
20
copula (top-down)
copula
(Cech 2006)
14
e-Thesys (98 )
Copula
copula
(kernel function, K )
(bandwidth, h ) [ x1 , x2 , K , xn ]
f K h
(4) 3.1
f ( x, h ) =
1 n x xi
K
nh i =1 h
(4)
UniformGaussianTriangularBiweight Epanechnikov
(scaling factor)21
(cumulative destiny function, CDF)
21
Copula
xi
3.1 ( K =Gaussian)
Copula
copula
copula n
n (uniform distribution)
n U (0, 1) (5)
(5)
F ( x1 , x2 , K, xn ) = C [F1 ( x1 ), F2 ( x2 ), K , Fn ( xn )]
(6)
copula C
1.
C : [0, 1] [0, 1]
2.
3.
C Ci
Copula
(continuous distributions)
copula (7)(strictly
increasing transformations)copula (invariance property)
(7)
copula
copula
W (ui ) = max(u1 + u 2 1, 0)
(8)
(9)
(10)
17
e-Thesys (98 )
Copula
u1
u1
u2
C(u1, u2)
C(u1, u2)
u2
u1
u2
Archimedean Copulas
Archimedean copulas
(closed-form solutions) copula
Archimedean copulas
C (u1 , u 2 , K , u n ) = 1[ (u1 ) + (u 2 ) + K + (u n )]
(11)
0 u1 , u2 , K , u n 1 (generator)
(i) (1) = 0
(ii) For all u (0, 1), ' (u) < 0 and '' (u) 0
(iii) 1 [0, ) (completely monotonic function)
Archimedean copulas
1. Gumbel copula
22
Copula
1/
n
C (u1 , u 2 , K , u n ) = exp (ln ui ) with > 1
i=1
(12)
(u ) = ( ln(u )) 1 (t ) = exp( t 1/ )
> 1 Gumbel copula
2. Frank copula
Frank copula copula
C (u1 , u2 , K , un ) =
1 in=1 (e ui 1)
ln 1 +
with > 0 when n 3
(e 1) n1
(13)
3. Clayton copula
C (u1 , u 2 , K , u n ) = ui n + 1
i=1
1 /
(u ) = u 1 1 (t ) = (t + 1)
1 /
with > 0
(14)
Copula
Elliptical Copulas
Elliptical copulas (elliptical distributions) copula
Students t copulas
1. Gaussian copula
Gaussian copula
C (u1 , u 2 , K , u n ) = R ( 1 (u1 ), 1 (u 2 ), K , 1 (u n ))
R (x1 , x 2 , K , xn ) =
xn
xn 1
x1
exp 0.5 z T R 1 z
(2 )n
(15)
| R |dz1dz 2 K dz n
(16)
R (ui )
1 (ui ) R
Gaussian copula
2. Students t copula
Students t copula
t R , ( x1 , K , xn ) =
+ n
( 2 )( )
n/2
xn
xn 1
x1
1
K 1 + z T R 1 z
(17)
( + n ) / 2
dz1 K dz n (18)
20
e-Thesys (98 )
Copula
t R , Students t t (ui )
Students t t1 (ui ) R
( 2001)
(selection of risk)
(insolvency)23
(underwriting
risk)
(investment risk)
(over collateralization)
23
21
e-Thesys (98 )
Copula
()
(expense risk)
(downside risk)
24
Copula
99%99.5%
99.9%
23
e-Thesys (98 )
Copula
Clayton copula
Clayton copula
4.1
+
+
++
/
24
e-Thesys (98 )
Copula
4.1 ()
+(/)
1
+ ++
++_
_
++
/[( +
)/2]
+++
/
1.
2.
2009
NLR
NRI
ER
UP
2816
2817
199103
199203
200909
200909
75
71
75
71
75
71
75
71
25
e-Thesys (98 )
Copula
4.2 ()
NLR
NRI
ER
UP
2819
2832
2848
2850
2852
199403
199703
199803
199903
199903
200909
200909
200909
200909
200909
63
51
47
42
42
63
51
47
43
43
63
51
47
42
41
63
51
47
42
41
49.58% 56.74%
33.29% 50.54%-5.04% 13.34%
4.21% 12.42%
2.64% 9.5% 2.4% 15.27%
3.27% 16.51%
4.22% 8.47%
26
e-Thesys (98 )
Copula
4.3
Panel ANLR
75
0.5154
0.0688
1.7896
6.4039
0.3987
0.5096
0.8355
71
0.4996
0.0296
-0.8497
0.8744
0.4013
0.5064
0.5621
63
0.5674
0.0950
-0.1546
0.9215
0.3131
0.5681
0.8052
51
0.5267
0.0610
0.7937
0.8967
0.4166
0.5193
0.6891
47
0.4958
0.0400
0.0923
-0.0878
0.4176
0.4967
0.6040
42
0.5507
0.0264
-0.1238
0.7679
0.4826
0.5506
0.6193
42
0.5424
0.0416
2.0663
8.4102
0.4643
0.5401
0.7264
71
0.4344
0.0343
0.2223
-0.3587
0.3712
0.4357
0.5075
63
0.4126
0.0720
-1.6287
2.1768
0.1631
0.4348
0.4975
51
0.3329
0.1527
0.0270
-1.4765
0.1320
0.3941
0.5929
47
0.4771
0.0309
-0.5441
0.5738
0.3814
0.4791
0.5275
42
0.4127
0.0240
-0.1701
-0.0966
0.3572
0.4143
0.4605
41
0.4429
0.0307
0.1358
-0.9881
0.3866
0.4377
0.5003
71
0.0408
0.0371
-0.5996
0.3758
-0.0665
0.0456
0.1078
63
0.0045
0.1017
2.6063
9.8036
-0.1612
-0.0089
0.4640
51
0.1334
0.1651
-0.0995
-0.9073
-0.2899
0.0839
0.3899
47
0.0085
0.0456
-1.2081
4.5136
-0.1734
0.0143
0.1050
42
0.0063
0.0327
-0.6922
-0.2657
-0.0690
0.0113
0.0591
41
0.0041
0.0372
0.5517
-0.2893
-0.0549
0.0015
0.0940
63
0.1242
0.0847
0.5538
-0.5751
-0.0052
0.1124
0.3328
51
0.0814
0.0569
0.7653
1.1900
-0.0283
0.0741
0.2658
47
0.0575
0.0596
-0.2311
2.7433
-0.1281
0.0560
0.2422
43
0.0421
0.0489
1.1943
2.7149
-0.0537
0.0358
0.2086
43
0.0612
0.0561
1.0948
2.6234
-0.0271
0.0542
0.2650
Panel BER
75
0.5054
0.0522
-0.2210
0.3359
0.3670
0.5124
0.6460
Panel CUP
75
-0.0504
0.0627
-1.1931
1.6191
-0.2630
-0.0381
0.0409
Panel DNRI
75
0.0652
0.0422
0.6596
-0.3132
-0.0052
0.0557
0.1797
71
0.0730
0.0608
1.4096
1.3872
0.0067
0.0537
0.2582
27
e-Thesys (98 )
Copula
Gaussian copula
99%99.5% 99.9%
Students t copula
99%99.5% 99.9%
4.4
()()
1%
99.9%
99.9%
99.9%
200%
28
e-Thesys (98 )
Copula
4.4
Copulas
RBC ratio
99.5%
99.9%
3,149,217
3,938,671
5,111,287
3,045,829
3,874,460
5,392,847
-3.2830%
-1.6303%
5.5086%
489,548
1,172,515
2,519,819
685,022
1,374,208
2,922,512
Difference
39.9294%
17.2017%
15.9810%
Gaussian
1,334,921
1,622,543
2,259,789
1,349,720
1,683,050
2,496,778
Difference
1.1086%
3.7291%
10.4872%
Gaussian
777,186
1,042,879
1,691,231
819,543
1,074,789
1,800,562
Difference
5.4501%
3.0597%
6.4646%
Gaussian
907,304
1,078,125
1,436,735
925,818
1,103,713
1,473,997
Difference
2.0405%
2.3734%
2.5935%
Gaussian
Students t
Difference
740,730
778,074
5.0416%
928,305
963,974
3.8424%
1,275,817
1,355,919
6.2785%
472,811
583,266
847,417
470,474
612,767
894,001
-0.4944%
5.0580%
5.4972%
Gaussian
Students t
1,601,336
4,050,062
200%-300%
Difference
Gaussian
Students t
Students t
Students t
Students t
22,325,133
4,808,926
4,980,818
2,090,308
5,311,525
33,748,593
6,834,398
7,457,529
5,346,006
10,164,868
> 300%
> 300%
> 300%
> 300%
> 300%
Gaussian
Students t
3,830,959
6,952,194
Difference
1.
2.
3.
4.
> 300%
99%
(TWD)
Difference[(Students copula Gaussian copula )/Gaussian copula ]100%
Gaussian copula
Students t copula
Clayton copula
Clayton copula
29
e-Thesys (98 )
Copula
99%99.5% 99.9%
4.5
4.4 4.5 Gaussian copula Students t copula
4.5 4.4
4.5 4.4
4.5 Clayton
copula Gaussian copula Students t copula
Clayton
copula
99.9%
Copulas
Gaussian
Students t
Clayton
Difference 1
Difference 2
Gaussian
Students t
Clayton
Difference 1
Difference 2
4.5
RBC ratio
99%
99.5%
99.9%
1,542,605 1,675,757 1,884,306
1,483,894 1,647,500 2,077,255
1,601,336
4,050,062 200%-300% 1,841,925 1,995,398 2,256,434
-3.8060% -1.6862% 10.2398%
19.4036% 19.0745% 19.7488%
-615,425
-278,141
610,501
-545,615
-101,987
790,520
> 300%
1,173,410 1,726,944 2,975,504
22,325,133
33,748,593
11.3435% 63.3328% 29.4870%
290.6666% 720.8880% 387.3871%
30
e-Thesys (98 )
Copula
4.5 ()
Copulas RBC ratio
99%
99.5%
99.9%
Gaussian
650,681
748,634
967,807
Students t
705,923
850,711 1,155,953
> 300%
Clayton
766,722
881,243 1,099,500
4,808,926
6,834,398
Difference 1
8.4898% 13.6351% 19.4405%
Difference 2
17.8338% 17.7135% 13.6074%
Gaussian
211,825
345,376
677,573
Students t
258,723
468,228
860,148
> 300%
Clayton
943,205 1,167,056 1,678,177
4,980,818
7,457,529
Difference 1
22.1400% 35.5704% 26.9455%
Difference 2
345.2752% 237.9088% 147.6748%
Gaussian
876,059 1,004,700 1,307,058
Students t
912,236 1,077,437 1,486,616
> 300%
Clayton
1,123,398 1,437,031 1,902,209
2,090,308
5,346,006
Difference 1
4.1295%
7.2396% 13.7375%
Difference 2
28.2331% 43.0308% 45.5336%
Gaussian
679,289
792,988 1,038,203
Students t
705,839
852,288 1,199,253
> 300%
Clayton
1,337,486 1,561,428 1,949,255
10,164,868
5,311,525
Difference 1
3.9086%
7.4782% 15.5124%
Difference 2
96.8952% 96.9045% 87.7527%
Gaussian
417,350
516,552
668,537
Students t
458,502
549,132
805,644
> 300%
Clayton
723,885
826,486 1,093,316
3,830,959
6,952,194
Difference 1
9.8602%
6.3071% 20.5085%
Difference 2
73.4478% 60.0004% 63.5386%
1. (TWD)
2. Difference1[(Student's copula Gaussian copula )/Gaussian copula ]100%
3. Difference2[(Clayton copula Gaussian copula )/Gaussian copula ]100%
(backtesting)
Kupiec
(1995)
31
e-Thesys (98 )
Copula
{[
LR = 2 ln (1 p )T N p N + 2 ln 1 ( N / T )T N ( N / T )
}~
2
1
(1)
(19)
T N p LR
12 (1) ( H 0 : p = ) 1
Kupiec (1995)
copula
Kupiec
copula
copula 4.6
4.6 copula
LR
4.4 4.5
99.9%
32
e-Thesys (98 )
Copula
4.6
Panel A 99%
Gaussian_VaR
T_VaR
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1
1
0
0
0
0
1
1
0
0.0026
0.0026
LR
3.0400
3.0400
2
6.6349
6.6349
6.6349
99% (1)
Kupiec
N
Panel B 99.5%
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
LR
2
99.5% (1)
7.8794
7.8794
7.8794
Kupiec
N
Panel C 99.9%
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
LR
2
99.9% (1)
10.8276
10.8276
10.8276
Kupiec
N
Gaussian_VaR
T_VaR
Clayton_VaR
2
2
1
0
0
0
1
1
1
0
0
0
0
0
0
1
1
0
0
0
0
4
4
2
0.0104
0.0104
0.0052
0.0051
0.0051
1.0990
6.6349
6.6349
6.6349
< 9
2
0
1
0
0
0
0
3
0.0078
0.5095
7.8794
< 6
2
0
0
0
0
0
0
2
0.0052
0.0025
7.8794
1
0
0
0
0
0
0
1
0.0026
0.5472
7.8794
1
0
0
0
0
0
0
1
0.0026
0.6768
10.8276
< 3
1
0
0
0
0
0
0
1
0.0026
0.6768
10.8276
0
0
0
0
0
0
0
0
0
10.8276
33
e-Thesys (98 )
Copula
1976
1992
20 2003
(capital requirement)
Gaussian copula
Students t copula Clayton copula
Clayton copula
Gaussian copula Students t copula
34
e-Thesys (98 )
Copula
Gaussian copula
Students t copula 99%
2003
copula
35
e-Thesys (98 )
Copula
1.
2.
3.
36
e-Thesys (98 )
Copula
[1] 2001
[2] 1997 47
50-63
[3] 2001
[4] 2006
(http://www.tii.org.tw/fcontent/information/information01.asp)
[5] 2001
64 85-108
[6] 2003
109-125
[7] 1998
107-131
[8] 2007
20
[9] 2001-
[10] 2001(VaR)
(RBC) 31 90-99
[11] 2002
18 2 113-130
37
e-Thesys (98 )
Copula
[12] 2000-
[1] Ahlgrim, K. C. 1999. Investigating the use of value at risk in insurance. Working
paper, University of Illinois at Urbana-Champaign, Department of Finance.
[2] Australian Prudential Regulation Authority (APRA). 2002. Prudential Standard
GPS 110: Capital Adequacy for General Insurers.
( http://www.apra.gov.au/General/upload/GPS-110-Capital-Adequacy-for-Genera
l-Insurers.pdf)
[3] Australian Prudential Regulation Authority (APRA). 2009. Prudential Practice
Guide: GPG 113General Insurance Internal Model-based Method for
Determining Minimum Capital Requirement.
( http://www.apra.gov.au/Policy/upload/PPG-113-March-GI-Internal-Models.pdf)
[4] Beder, T. S. 1995. VaR: Seductive but dangerous. Financial Analysts Journal 51:
11-24.
[5] Berger, A. N., R. J. Herring, and G. P. Szeg. 1995. The role of capital in
financial institutions. Journal of Banking and Finance 19: 393-430.
[6] Bowman, A. W., and A. Azzalini. 1997. Applied smoothing techniques for data
analysis. United States: Oxford University Press.
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Working paper, The University of Applied Sciences of bfi Vienna.
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38
e-Thesys (98 )
Copula
Copula
Copula
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South Wales, Sydney, Australia.
41
e-Thesys (98 )
Copula
1.
(/) 100%
2.
C0-
C1-
C1O-
C1S-
C0
C1
C1O=C1C1S
C1S
C2
C2
C3
C3
C4
C4
RBC_unadj=C0+C1+C2+C3+C4
RBC_life
TAC_life
RBC Ratio=TAC_life/RBC
C0(%)=
C0_RBC(%)=
C0/RBC_unadj
C0/RBC
C1(%)=
C1_RBC(%)=
C1/RBC_unadj
C1/RBC
C1O(%)=
C1O_RBC(%)=
C1O/RBC_unadj
C1O/RBC
C1S(%)=
C1S_RBC(%)=
C1S/RBC_unadj
C1S/RBC
C2(%)=
C2_RBC(%)=
C2/RBC_unadj
C2/RBC
C3(%)=
C3_RBC(%)=
C3/RBC_unadj
C3/RBC
C4(%)=
C4_RBC(%)=
C4/RBC_unadj
C4/RBC
C0(%)+C1(%)+C2
(%)+C3(%)+C4(%)
98 RBC
42
e-Thesys (98 )
Copula
1.0000
1.0000
1.0000
(
97.11.15 )
1.0000
(
97.11.15
1.0000
--()
0.8000
--
()
0.8000
ETF-()
0.8000
()
0.8000
()
0.8000
1.0000
1.0000
1.0000
()
98 RBC
43
e-Thesys (98 )
Copula
1.
(/) 100%
2.
R0
R1
R1O
R1S
-----
R2
R3a -
R3b -
R4
R5
R0(%)=
R0_RBC(%)=
R0
R0/RBC_unadj
R0/RBC
R1(%)=
R1_RBC(%)=
R1
R1/RBC_unadj
R1/RBC
R1O(%)=
R1O_RBC(%)=
R1O
R1O /RBC_unadj
R1O/RBC
R1S(%)=
R1S_RBC(%)=
R1S
R1S/RBC_unadj
R1S/RBC
R2(%)=
R2_RBC(%)=
R2
R2/RBC_unadj
R2/RBC
R3(%)=
R3a_RBC(%)=
R3a
R3a/RBC_unadj
R3a/RBC
R3b(%)=
R3b_RBC(%)=
R3b
R3b/RBC_unadj
R3b/RBC
R4(%)=
R4_RBC(%)=
R4
R4/RBC_unadj
R4/RBC
R5(%)=
R5_RBC(%)=
R5
R5/RBC_unadj
R5/RBC
R0(%)+R1(%)+R2
RBC_unadj=R0+R1+R2+R3a+R3b
(%)+R3a(%)+R3b(
+R4+R5
%)+R4(%)+R5(%)
RBC_P & C
TAC_P & C
98 RBC
44
e-Thesys (98 )
Copula
1.0000
1.0000
(
97.11.15 )
1.0000
(
97.11.15
1.0000
--()
0.8000
--
()
0.8000
ETF-()
0.8000
()
0.8000
()
0.8000
()
1.0000
1.0000
1.0000
()
98 RBC
45
e-Thesys (98 )