CAS Exam 7 Spring 2012, Question 17
Study guide: Exam 9
An insurer writes property and workers compensation insurance in California. To model the total annual losses for this insurer, the following two copulas are being considered:
- i.
C(u,v) = uv - ii.
C(u,v) = \min(u,v)^{0.25}(uv)^{0.75}
Part a (1 point)
Define and briefly explain the right-tail concentration function that may be used to characterize a copula.
Part b (2 points)
Derive and graph the right-tail concentration functions for the two copulas.
Part c (1 point)
Explain which copula is more appropriate to model total losses for this insurer. Briefly describe how the graph in part b. above supports your answer.
Answer this question and see the worked solution