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Pricing Cyber Risk: The Copula-Based Approach

aNational Taichung University of Science and Technology, Taiwan. Corresponding: Dr. I-Chien Liu, email: .
bNational Chung Hsing University, Taiwan

Advances in Pacific Basin Business, Economics and Finance

ISBN: 978-1-80043-871-2, eISBN: 978-1-80043-870-5

Publication date: 22 July 2021

Abstract

Cyber risk refers to risk affecting information and technology assets of a corporation or government institution. As cyber risk management become important, insurance is one possible solution. However, lack of data and severe information asymmetries increase the difficulties in pricing-related insurance products. In this chapter, we discuss first-party insurance that indemnifies the loss when the insured encounters virus attack and provide pricing model for the policy using copula methodology. Simulation results show that model risk may exist in the distribution of server downtime hours and is minor in the distribution of incident frequency and number of personal computers (PCs) infected.

Keywords

Citation

Su, K.C., Lee, C.-B., Lin, S.-H., Liu, I.-C. and Chen, H.-C. (2021), "Pricing Cyber Risk: The Copula-Based Approach", Lee, C.-F. and Yu, M.-T. (Ed.) Advances in Pacific Basin Business, Economics and Finance (Advances in Pacific Basin Business, Economics and Finance, Vol. 9), Emerald Publishing Limited, Bingley, pp. 161-174. https://doi.org/10.1108/S2514-465020210000009008

Publisher

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Emerald Publishing Limited

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