In this paper we show how to extend a simple common shock model with Archimedean dependence of the hidden variables to the non-exchangeable case. The assumption is that the hidden risk factors are linked by a hierarchical Archimedean dependence structure, possibly fully nested. We give directions about how to implement the model and to address the issue that the hidden variables must be put in descending dependence order. We show how the model can be simplified in the Gumbel-Marshall-Olkin distribution in Cherubini and Mulinacci (2017), the only case in which exponential distribution of the observed variables is preserved.

Hierarchical Archimedean Dependence in Common Shock Models

Cherubini U.
;
Mulinacci S.
2021

Abstract

In this paper we show how to extend a simple common shock model with Archimedean dependence of the hidden variables to the non-exchangeable case. The assumption is that the hidden risk factors are linked by a hierarchical Archimedean dependence structure, possibly fully nested. We give directions about how to implement the model and to address the issue that the hidden variables must be put in descending dependence order. We show how the model can be simplified in the Gumbel-Marshall-Olkin distribution in Cherubini and Mulinacci (2017), the only case in which exponential distribution of the observed variables is preserved.
File in questo prodotto:
File Dimensione Formato  
Cheruibini_Mulinacci_MCAP.pdf

Open Access dal 14/08/2021

Tipo: Postprint
Licenza: Licenza per accesso libero gratuito
Dimensione 495.83 kB
Formato Adobe PDF
495.83 kB Adobe PDF Visualizza/Apri

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11585/774092
Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus 0
  • ???jsp.display-item.citation.isi??? 0
social impact