Tail mutual exclusivity and Tail-VaR lower bounds |
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| Authors: | Ka Chun Cheung Michel Denuit Jan Dhaene |
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| Affiliation: | 1. Department of Statistics and Actuarial Science, The University of Hong Kong, Hong Kong, Hong Kong.;2. Institut de statistique, biostatistique et sciences actuarielles – ISBA, Université Catholique de Louvain, Louvain-la-Neuve, Belgium.;3. Actuarial Research Group, AFI, Faculty of Business and Economics, Katholieke Universiteit Leuven, Leuven, Belgium.;4. Department of Mathematical Statistics and Actuarial Science, University of the Free State, Bloemfontein, South Africa. |
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| Abstract: | In this paper, we extend the concept of mutual exclusivity proposed by [Dhaene, J. & Denuit, M. (1999). The safest dependence structure among risks. Insurance: Mathematics and Economics 25, 11–21] to its tail counterpart and baptize this new dependency structure as tail mutual exclusivity. Probability levels are first specified for each component of the random vector. Under this dependency structure, at most one exceedance over the corresponding Value-at-Risks (VaRs) is possible, the other components being zero in such a case. No condition is imposed when all components stay below the VaRs. Several properties of this new negative dependence concept are derived. We show that this dependence structure gives rise to the smallest value of Tail-VaR (TVaR) of a sum of risks within a given Fréchet space, provided that the probability level of the TVaR is close enough to one. |
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| Keywords: | mutual exclusivity stop-loss transform tail convex order risk measures |
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