Weighted sums of subexponential random variables and asymptotic dependence between returns on reinsurance equities
Asymptotic tail probabilities for bivariate linear combinations of subexponential random variables are given. These results are applied to explain the joint movements of the stocks of reinsurers. Portfolio investment and retrocession practices in the reinsurance industry, for reasons of diversification, exposes different reinsurers to the same risks on both sides of their balance sheets. Assuming, in line with the industry practice that the risk drivers follow subexponential distributions, we derive (under mild conditions) when the reinsurer's equity returns are asymptotically dependent, exposing the industry to systemic risk.
(This abstract was borrowed from another version of this item.)
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.
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.
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.:
- Jondeau, Eric & Rockinger, Michael, 2003.
"Testing for differences in the tails of stock-market returns,"
Journal of Empirical Finance,
Elsevier, vol. 10(5), pages 559-581, December.
- Michael Rockinger & Eric Jondeau, 2001. "Testing for differences in the tails of stock-market returns," Working Papers hal-00601480, HAL.
- ROCKINGER, Michael & JONDEAU, Eric, 2001. "Testing for differences in the tails of stock-market returns," Les Cahiers de Recherche 739, HEC Paris.
- P. Hartmann & S. Straetmans & C. G. de Vries, 2004. "Asset Market Linkages in Crisis Periods," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 313-326, February.
- Philipp Hartman & Stefan Straetmans & Casper De Vries, 2001. "Asset market linkages in crisis periods," Proceedings 727, Federal Reserve Bank of Chicago.
- P. Hartmann & S. Straetmans & C.G. de Vries, 2001. "Asset Market Linkages in Crisis Periods," Tinbergen Institute Discussion Papers 01-071/2, Tinbergen Institute.
- de Vries, Casper G & Hartmann, Philipp & Straetmans, Stefan, 2001. "Asset Market Linkages in Crisis Periods," CEPR Discussion Papers 2916, C.E.P.R. Discussion Papers.
- Hartmann, P. & Straetmans, S. & De Vries, C.G., 2001. "Asset Market Linkages in Crisis Periods," Papers 71, Quebec a Montreal - Recherche en gestion.
- Hartmann, Philipp & Straetmans, Stefan & de Vries, Casper, 2001. "Asset market linkages in crisis periods," Working Paper Series 0071, European Central Bank.
- Davis, Richard & Resnick, Sidney, 1988. "Extremes of moving averages of random variables from the domain of attraction of the double exponential distribution," Stochastic Processes and their Applications, Elsevier, vol. 30(1), pages 41-68, November.
- De Vries, C.G., 2005. "The simple economics of bank fragility," Journal of Banking & Finance, Elsevier, vol. 29(4), pages 803-825, April.
- C.G. de vries, 2004. "The simple economics of bank fragility," WO Research Memoranda (discontinued) 755, Netherlands Central Bank, Research Department.
- Blattberg, Robert C & Gonedes, Nicholas J, 1974. "A Comparison of the Stable and Student Distributions as Statistical Models for Stock Prices," The Journal of Business, University of Chicago Press, vol. 47(2), pages 244-280, April.
- Jansen, Dennis W & de Vries, Casper G, 1991. "On the Frequency of Large Stock Returns: Putting Booms and Busts into Perspective," The Review of Economics and Statistics, MIT Press, vol. 73(1), pages 18-24, February.
- Dennis W. Jansen & Casper de Vries, 1988. "On the frequency of large stock returns: putting booms and busts into perspective," Working Papers 1989-006, Federal Reserve Bank of St. Louis.
- Embrechts, Paul & Goldie, Charles M., 1982. "On convolution tails," Stochastic Processes and their Applications, Elsevier, vol. 13(3), pages 263-278, September.
- François Longin, 2001. "Extreme Correlation of International Equity Markets," Journal of Finance, American Finance Association, vol. 56(2), pages 649-676, 04.
- Longin, Francois M, 1996. "The Asymptotic Distribution of Extreme Stock Market Returns," The Journal of Business, University of Chicago Press, vol. 69(3), pages 383-408, July.
- Geluk, Jaap, 2004. "Asymptotics in the symmetrization inequality," Statistics & Probability Letters, Elsevier, vol. 69(1), pages 63-68, August.
- Starica, Catalin, 1999. "Multivariate extremes for models with constant conditional correlations," Journal of Empirical Finance, Elsevier, vol. 6(5), pages 515-553, December.
- Benoit Mandelbrot, 2015. "The Variation of Certain Speculative Prices," World Scientific Book Chapters,in: THE WORLD SCIENTIFIC HANDBOOK OF FUTURES MARKETS, chapter 3, pages 39-78 World Scientific Publishing Co. Pte. Ltd..