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ASYMPTOTICS FOR SYSTEMIC RISK WITH DEPENDENT HEAVY-TAILED LOSSES

Published online by Cambridge University Press:  29 April 2021

Jiajun Liu  and
Yang Yang
Jiajun Liu*
Affiliation:
Department of Statistics and Actuarial Science, Xi’an Jiaotong-Liverpool University, E-Mail: jiajun.liu@xjtlu.edu.cn
Yang Yang
Affiliation:
Department of Statistics, Nanjing Audit University, E-Mail: yangyangmath@163.com
*
E-Mail: jiajun.liu@xjtlu.edu.cn
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Abstract

Systemic risk (SR) is considered as the risk of collapse of an entire system, which has played a significant role in explaining the recent financial turmoils from the insurance and financial industries. We consider the asymptotic behavior of the SR for portfolio losses in the model allowing for heavy-tailed primary losses, which are equipped with a wide type of dependence structure. This risk model provides an ideal framework for addressing both heavy-tailedness and dependence. As some extensions, several simulation experiments are conducted, where an insurance application of the asymptotic characterization to the determination and approximation of related SR capital has been proposed, based on the SR measure.

Keywords

asymptoticsdependenceheavy-tailednesssystemic risksystemic risk contagion
Type
Research Article
Information
ASTIN Bulletin: The Journal of the IAA , Volume 51 , Issue 2 , May 2021 , pp. 571 - 605
Copyright
© 2021 by Astin Bulletin. All rights reserved

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