The Unholy Trinity: Fat Tails, Tail Dependence, and Micro-correlations

Carolyn Kousky, Roger M Cooke

Research output: Working paperDiscussion paper

12 Citations (Scopus)


Recent events in the financial and insurance markets, as well as the looming challenges of a globally changing climate point to the need to re-think the ways in which we measure and manage catastrophic and dependent risks. Management can only be as good as our measurement tools. To that end, this paper outlines detection, measurement, and analysis strategies for fat-tailed risks, tail dependent
risks, and risks characterized by micro-correlations. A simple model of insurance demand and supply is used to illustrate the difficulties in insuring risks characterized by these phenomena. Policy implications are discussed.
Original languageEnglish
Place of PublicationWashington, DC
Number of pages36
Publication statusPublished - 2009


  • risk management
  • dependent risk
  • catastrophic risk
  • risk management strategies


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