CAS Exam 7 Spring 2016, Question 25
Study guide: Exam 9
An insurer writes commercial property and workers compensation insurance in the same geographical area. The insurer is considering two copulas to model the joint distribution of these two lines of business.
Below is a plot of the right-tail concentration function for each copula:
Part a (0.75 points)
Discuss which function is more appropriate if the insurer is writing business in an area with high exposure to earthquakes.
Part b (0.5 points)
Briefly explain why graphs of right-tail concentration functions can often be misleading and recommend a solution to this problem.
Answer this question and see the worked solution