Modelling Dependent Risk With Copulas: An Application On Flooding Using Agent-Based Modelling

Hochrainer-Stigler, S. & Poledna, S. (2016). Modelling Dependent Risk With Copulas: An Application On Flooding Using Agent-Based Modelling. Geoinformatics Research Papers 4 (BS4002) 10.2205/2016BS01Sochi.

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Abstract

In the present work we introduce a copula approach to model dependencies between risks in large scale networks and show how this could be used to avoid underestimation of extreme events. Furthermore, we apply the approach within an agent based model to determine the macroeconomic consequences due to flood events. We show that without a copula approach only average annual losses on the country level would be available. However, with the copula approach, which includes the estimation of basin scale loss distribution through catastrophe modelling, exposure estimation through Corine land cover mapping, assessment of appropriate copulas and parameter estimation, including a algorithm to couple coupled basins as well as an upscaling procedure to the country level, the whole risk spectrum can be, for the first time on this scale, estimated. The direct loss estimates from the copula approach, separated into different risk bearers, are used to build a damage scenario generator which gives the input for the agent based model. The agent based model in turn assesses the additional indirect losses due to the event which can be much larger than the direct losses alone.

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