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Understanding relationships using copulas (1998)
| Venue: | North American Actuarial Journal |
| Citations: | 222 - 8 self |
BibTeX
@ARTICLE{Valdez98understandingrelationships,
author = {Emiliano A. Valdez},
title = {Understanding relationships using copulas},
journal = {North American Actuarial Journal},
year = {1998},
volume = {2},
pages = {1--25}
}
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Abstract
This article introduces actuaries to the concept of "copulas, " a tool for understanding relationships among multivariate outcomes. A copula is a function that links univariate marginals to their full multivariate distribution. Copulas were introduced in 1959 in the context of probabilistic metric spaces. Recently, there has been a rapidly developing literature on the statistical properties and applications of copulas. This article explores some of these practical applications, including estimation of joint life mortality and multidecrement models. In addition, we describe basic properties of copulas, their relationships to measures of dependence and several families of copulas that have appeared in the literature. An annotated bibliography provides a resource for researchers and practitioners who wish to continue their study of copulas. This article will also be useful to those who wish to use copulas for statistical inference. Statistical inference procedures are illustrated using insurance company data on losses and expenses. For this data, we (1) show how to fit copulas and (2) describe their usefulness by pricing a reinsurance contract and estimating expenses for pre-specified losses.
Keyphrases
understanding relationship basic property practical application full multivariate distribution reinsurance contract univariate marginals developing literature annotated bibliography insurance company data several family statistical inference procedure joint life mortality multivariate outcome estimating expense statistical inference probabilistic metric space statistical property pre-specified loss multidecrement model
