Christopher Blier-Wong

Department of Statistical Sciences, University of Toronto

Title: Collective risk models with FGM dependence
Date: Friday, November 22nd, 2024
Time: 1:30PM (PDT)
Location: ASB 10900

Abstract: We study copula-based collective risk models when the dependence structure is defined by a Farlie-Gumbel-Morgenstern (FGM) copula. By leveraging a one-to-one correspondence between the class of FGM copulas and multivariate symmetric Bernoulli distributions, we find convenient representations for the moments and Laplace-Stieltjes transform for the aggregate random variable defined from collective risk models with FGM dependence. We examine different components of this collective risk model, aiming to better understand the impact of the assumed dependence between a claim's frequency and severity. Relying on stochastic ordering, we analyze the impact of dependence on the aggregate claim amount random variable. Even if the FGM copula may only induce moderate dependence, we illustrate through numerical examples that the cumulative effect of FGM dependence can lead to substantial variations in key risk measures on aggregate random variables defined from collective risk models.