Open AccessOptimal capital allocation with copulas
Author(s) -
Xie Jie-hua
Publication year - 2016
Publication title -
hacettepe journal of mathematics and statistics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.312
H-Index - 26
ISSN - 1303-5010
DOI - 10.15672/hjms.20174620776
Subject(s) - mathematics , capital allocation line , mathematical economics , econometrics , profit (economics) , economics , microeconomics
In this paper, we investigate optimal capital allocation problems for a portfolio consisting of different lines of risks linked by a Farlie-Gumbel- Morgenstern copula, modelling the dependence between them. Based on the Tail Mean-Variance principle, we examine the bivariate case and then the multivariate case. Explicit formulae for optimal capital allocations are obtained for exponential loss distributions. Finally, the results are illustrated by various numerical examples.
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