nr 105 An Upper Bound of the Sum of Risks: two Applications of Comonotonicity

DNB Working Papers
Publicatiedatum 24 juni 2006

This paper discusses the method of comonotonicity to estimate the sum of risks. Two applications are presented. First, we estimate a property insurer’s exposure to claims after a severe storm. Second, we apply our approach to a pension fund’s investment risk to estimate the prospective total assets and the conditional prospective funding rate. Both applications show that comonotonicity can be a useful tool to assess the upper bound for the risk exposure of financial institutions. JEL Codes: C13, G22, G23 Keywords: estimate, sum of risks, investment