On the Diversification Effect in Solvency II for Extremely Dependent Risks

• Published in: Risks (Basel) Vol. 11; no. 8; p. 143
• Main Authors: Chen, Yongzhao, Cheung, Ka Chun, Yam, Sheung Chi Phillip, Yuen, Fei Lung, Zeng, Jia
• Format: Journal Article
• Language: English
• Published: Basel MDPI AG 01.08.2023
• Subjects: Diversification; extreme-value copula; Financial institutions; Random variables; Solvency; Solvency II; spectral measure; Value-at-Risk

In this article, we investigate the validity of diversification effect under extreme-value copulas, when the marginal risks of the portfolio are identically distributed, which can be any one having a finite endpoint or belonging to one of the three maximum domains of attraction. We show that Value-a...