Hi all,I am busy with an exercise as part of building an Economic Capital model at an Insurance Company. Suppose I quantify my Lapse risk to be 2000, can someone confirm if I am right in assuming a normal distribution for the Lapse risk here. I think I read that one of the assumptions underlying the Solvency II standard formula is normality for individual risks but I can't seem to locate where I read it. 1) Is it enough to assume normality of individual risks when they are aggregated using a correlation matrix which means that a correlation matrix implies Pearson's rho? 2) Can we have a correlation matrix made up of Kendall's Tau?
Last edited by Tedypendah
on March 29th, 2015, 10:00 pm, edited 1 time in total.