Advanced Search
MyIDEAS: Login

Risk concentration and diversification: Second-order properties

Contents:

Author Info

  • Degen, Matthias
  • Lambrigger, Dominik D.
  • Segers, Johan
Registered author(s):

    Abstract

    The quantification of diversification benefits due to risk aggregation plays a prominent role in the (regulatory) capital management of large firms within the financial industry. However, the complexity of today's risk landscape makes a quantifiable reduction of risk concentration a challenging task. In the present paper we discuss some of the issues that may arise. The theory of second-order regular variation and second-order subexponentiality provides the ideal methodological framework to derive second-order approximations for the risk concentration and the diversification benefit.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.sciencedirect.com/science/article/B6V8N-4YBMF6T-2/2/27feccf297c4bd67aa866026ba20a0ff
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Bibliographic Info

    Article provided by Elsevier in its journal Insurance: Mathematics and Economics.

    Volume (Year): 46 (2010)
    Issue (Month): 3 (June)
    Pages: 541-546

    as in new window
    Handle: RePEc:eee:insuma:v:46:y:2010:i:3:p:541-546

    Contact details of provider:
    Web page: http://www.elsevier.com/locate/inca/505554

    Related research

    Keywords: IE43 Diversification Second-order regular variation Second-order subexponentiality Subadditivity Value-at-Risk;

    Find related papers by JEL classification:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Philippe Artzner & Freddy Delbaen & Jean-Marc Eber & David Heath, 1999. "Coherent Measures of Risk," Mathematical Finance, Wiley Blackwell, vol. 9(3), pages 203-228.
    2. Omey, E. & Willekens, E., 1986. "Second order behaviour of the tail of a subordinated probability distribution," Stochastic Processes and their Applications, Elsevier, vol. 21(2), pages 339-353, February.
    3. Rustam Ibragimov & Dwight Jaffee & Johan Walden, 2009. "Nondiversification Traps in Catastrophe Insurance Markets," Review of Financial Studies, Society for Financial Studies, vol. 22(3), pages 959-993, March.
    4. Ibragimov, Rustam & Walden, Johan, 2007. "The limits of diversification when losses may be large," Journal of Banking & Finance, Elsevier, vol. 31(8), pages 2551-2569, August.
    5. Nadine Gatzert & Hato Schmeiser & Stefan Schuckmann, 2008. "Enterprise risk management in financial groups: analysis of risk concentration and default risk," Financial Markets and Portfolio Management, Springer, vol. 22(3), pages 241-258, September.
    6. Walden, Johan & Ibragimov, Rustam, 2007. "The limits of diversification when losses may be large," Scholarly Articles 2624460, Harvard University Department of Economics.
    7. Rustam Ibragimov & Johan Walden, 2006. "The Limits of Diversification When Losses May Be Large," Harvard Institute of Economic Research Working Papers 2104, Harvard - Institute of Economic Research.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as in new window

    Cited by:
    1. Tong, Bin & Wu, Chongfeng & Xu, Weidong, 2012. "Risk concentration of aggregated dependent risks: The second-order properties," Insurance: Mathematics and Economics, Elsevier, vol. 50(1), pages 139-149.
    2. Mao, Tiantian & Lv, Wenhua & Hu, Taizhong, 2012. "Second-order expansions of the risk concentration based on CTE," Insurance: Mathematics and Economics, Elsevier, vol. 51(2), pages 449-456.
    3. Guillén, Montserrat & Sarabia, José María & Prieto, Faustino, 2013. "Simple risk measure calculations for sums of positive random variables," Insurance: Mathematics and Economics, Elsevier, vol. 53(1), pages 273-280.
    4. Lv, Wenhua & Pan, Xiaoqing & Hu, Taizhong, 2013. "Asymptotics of the risk concentration based on the tail distortion risk measure," Statistics & Probability Letters, Elsevier, vol. 83(12), pages 2703-2710.

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:eee:insuma:v:46:y:2010:i:3:p:541-546. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.