Overbeck2 | R Documentation |
This function implements the Overbeck type II allocation principle for optimal capital allocation.
Overbeck2( Loss, Capital, alpha = 0.95, model = c("normal", "t-student", "both"), df = NULL )
Loss |
Either a scalar or a vector of size N containing the mean losses. |
Capital |
A scalar representing the capital to be allocated to each loss. |
alpha |
A numeric value (either a single one or a vector) consisting of the significance level at which the allocation has to be computed, it can either be a single numeric value or a vector of numeric values. |
model |
A character string indicating which distribution is to be used for computing the
VaR underlying the Overbeck type II principle, the default value is the |
df |
An integer indicating the degrees of freedom for the t-student distribution when setting
|
Overbeck2
computes the capital allocation based on the following formulation:
K_i = \fracKCTE_p[S] E \left[ X_i|S > F_X_S^-1(p) \right], \quad i=1, ..., n.K_i = \fracKCTE_p[S] E \left[ X_i|S > F_X_S^-1(p) \right], \quad i=1, ..., n.
Where \mjteqnKK is the aggregate capital to be allocated, \mjteqnCTE_p[S]CTE_p[S] is the Conditional Tail Expectation of the aggregate loss at level \mjteqnpp, \mjteqnX_iX_i is the individual loss, \mjteqnSS is the aggregate loss and \mjteqnF_X^-1(p) F_X^-1(p) is the quantile function of \mjteqnXX at level \mjteqnp.p.
A vector containing the optimal capital allocation,
if Capital
is set to 1, then the returned matrix will consist of the proportions of capital
each individual loss needs to be optimally faced.
Jilber Urbina
Dhaene J., Tsanakas A., Valdez E. and Vanduffel S. (2011). Optimal Capital Allocation Principles. The Journal of Risk and Insurance. Vol. 00, No. 0, 1-28.
Urbina, J. (2013) Quantifying Optimal Capital Allocation Principles based on Risk Measures. Master Thesis, Universitat Politècnica de Catalunya.
Urbina, J. and Guillén, M. (2014). An application of capital allocation principles to operational risk and the cost of fraud. Expert Systems with Applications. 41(16):7023-7031.
hap
, cap
data(dat1, dat2) Loss <- cbind(Loss1=dat1[1:400, ], Loss2=unname(dat2)) # Proportions of capital to be allocated to each bussines unit Overbeck2(Loss, Capital=1) # Capital allocation, # capital is determined as the empirical VaR of the losses at 99\% K <- quantile(rowSums(Loss), probs = 0.99) Overbeck2(Loss, Capital=K)
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