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- Title
On a Multiplicative Multivariate Gamma Distribution with Applications in Insurance.
- Authors
Semenikhine, Vadim; Furman, Edward; Su, Jianxi
- Abstract
One way to formulate a multivariate probability distribution with dependent univariate margins distributed gamma is by using the closure under convolutions property. This direction yields an additive background risk model, and it has been very well-studied. An alternative way to accomplish the same task is via an application of the Bernstein–Widder theorem with respect to a shifted inverse Beta probability density function. This way, which leads to an arguably equally popular multiplicative background risk model (MBRM), has been by far less investigated. In this paper, we reintroduce the multiplicative multivariate gamma (MMG) distribution in the most general form, and we explore its various properties thoroughly. Specifically, we study the links to the MBRM, employ the machinery of divided differences to derive the distribution of the aggregate risk random variable explicitly, look into the corresponding copula function and the measures of nonlinear correlation associated with it, and, last but not least, determine the measures of maximal tail dependence. Our main message is that the MMG distribution is (1) very intuitive and easy to communicate, (2) remarkably tractable, and (3) possesses rich dependence and tail dependence characteristics. Hence, the MMG distribution should be given serious considerations when modelling dependent risks.
- Subjects
RISK (Insurance); RISK assessment -- Mathematical models; GAMMA distributions; MULTIVARIATE analysis; PROBABILITY density function
- Publication
Risks, 2018, Vol 6, Issue 3, p79
- ISSN
2227-9091
- Publication type
Article
- DOI
10.3390/risks6030079