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Activity Number:
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130
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Type:
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Contributed
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Date/Time:
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Monday, August 3, 2009 : 8:30 AM to 10:20 AM
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Sponsor:
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Business and Economic Statistics Section
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| Abstract - #304775 |
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Title:
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Dynamic Pricing the Revenue Insurance Contracts: A Time-Varying Copula Model
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Author(s):
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Ying Zhu*+ and Sujit Ghosh and Barry Goodwin
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Companies:
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North Carolina State University and North Carolina State University and North Carolina State University
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Address:
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2014 Kilarney Ridge Loop, Cary, NC, 27511,
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Keywords:
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multivariate distribution ; time-varying dependence
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Abstract:
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In designing revenue insurance contracts, it is important to develop a flexible model that accounts for the dependence between several risk variables. As the association between risks may vary over time, a copula with time-varying parameter may offer a better alternative to a static model for dependence structure. This study proposes a dynamic copula model in which the evolution of the copula parameter is a time-varying function of some predictor variables. The inference based on MLE indicates that the proposed model provides a tractable dynamic expression to the change of the copula and offers more information on how yield and price risks are related. We found that the risk pairs with the time-varying model present a stronger dependence coefficient than that based on the corresponding static copula model, which is consistent with the empirical evidence in the agricultural risk management.
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