Estimating the Conditional Tail Expectation in the Case of Heavy-Tailed Losses.pdfVIP

Hindawi Publishing Corporation Journal of Probability and Statistics Volume 2010, Article ID 596839, 17 pages doi:10.1155/2010/596839 Research Article Estimating the Conditional Tail Expectation in the Case of Heavy-Tailed Losses 1 2 ˇ 3 Abdelhakim Necir, Abdelaziz Rassoul, and Ricardas Zitikis 1 Laboratory of Applied Mathematics, Mohamed Khider University of Biskra, 07000, Algeria 2 Ecole Nationale Superieure d’Hydraulique, Guerouaou, BP 31, Blida, 09000, Algeria 3 Department of Statistical and Actuarial Sciences, University of Western Ontario, London, ON, Canada N6A5B7 Correspondence should be addressed to Ricardas Zitikis, zitikis@stats.uwo.ca ˇ Received 21 October 2009; Accepted 20 January 2010 Academic Editor: Edward Furman Copyright q 2010 Abdelhakim Necir et al. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. The conditional tail expectation CTE is an important actuarial risk measure and a useful tool in financial risk assessment. Under the classical assumption that the second moment of the loss variable is finite, the asymptotic normality of the nonparametric CTE estimator has already been established in the literature. The noted result, however, is not applicable when the loss variable follows any distribution with infinite second moment, which is a frequent situation in practice. With a help of extreme-value methodology, in this paper, we offer a solution to the problem by suggesting a new CTE estimat