The notion of residual estimation risk is introduced to quantify the impact of parameter uncertainty on capital adequacy, for a given risk measure and capital estimation procedure. Residual risk equals the risk measure applied to the difference between a random loss and the corresponding capital estimator. Modified estimation procedures are proposed, based on parametric bootstrapping and predictive distributions, which compensate the impact of parameter uncertainty and lead to higher capital requirements. In the particular case of location-scale families, the analysis simplifies and a capital estimator can always be found that leads to a residual risk of exactly zero.

Bignozzi, V., & Tsanakas, A. (2016). Parameter Uncertainty and Residual Estimation Risk. JOURNAL OF RISK AND INSURANCE, 83(4), 949-978 [10.1111/jori.12075].

Parameter Uncertainty and Residual Estimation Risk

BIGNOZZI, VALERIA
Primo
;
2016

Abstract

The notion of residual estimation risk is introduced to quantify the impact of parameter uncertainty on capital adequacy, for a given risk measure and capital estimation procedure. Residual risk equals the risk measure applied to the difference between a random loss and the corresponding capital estimator. Modified estimation procedures are proposed, based on parametric bootstrapping and predictive distributions, which compensate the impact of parameter uncertainty and lead to higher capital requirements. In the particular case of location-scale families, the analysis simplifies and a capital estimator can always be found that leads to a residual risk of exactly zero.
Articolo in rivista - Articolo scientifico
Scientifica
Accounting; Finance; Economics and Econometrics
English
Bignozzi, V., & Tsanakas, A. (2016). Parameter Uncertainty and Residual Estimation Risk. JOURNAL OF RISK AND INSURANCE, 83(4), 949-978 [10.1111/jori.12075].
Bignozzi, V; Tsanakas, A
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Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/10281/143453
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