the impact of systemic risk on the diversification benefits of a risk portfolio

Clicks: 352
ID: 133695
2014
Free PDF
Article Quality & Performance Metrics
Overall Quality
Not rated
Combines reader engagement with the AI quality analysis. This article has not been analysed, so there is no overall score — reader engagement is measured and shown alongside.
AI Quality Assessment
Not analyzed
Readership in this journal
Star

Ranked #22 of 82 articles by views in world neurosurgery

Most read Least read

Bar heights use a square-root scale.

Mint this article as an NFT
Not yet minted

Create a permanent, verifiable on-chain record of this article on the Scimatic Network. The NFT is held in your Journament account, and you can withdraw it to your own wallet at any time.

5 SUSD one-off · no wallet required
Sign in to mint
Abstract
Risk diversification is the basis of insurance and investment. It is thus crucial to study the effects that could limit it. One of them is the existence of systemic risk that affects all of the policies at the same time. We introduce here a probabilistic approach to examine the consequences of its presence on the risk loading of the premium of a portfolio of insurance policies. This approach could be easily generalized for investment risk. We see that, even with a small probability of occurrence, systemic risk can reduce dramatically the diversification benefits. It is clearly revealed via a non-diversifiable term that appears in the analytical expression of the variance of our models. We propose two ways of introducing it and discuss their advantages and limitations. By using both VaR and TVaR to compute the loading, we see that only the latter captures the full effect of systemic risk when its probability to occur is low.
Reference Key
busse2014risksthe Use this key to autocite in the manuscript while using SciMatic Manuscript Manager or Thesis Manager
Authors ;Marc Busse;Michel Dacorogna;Marie Kratz
Journal world neurosurgery
Year 2014
DOI
10.3390/risks2030260
URL
http://www.mdpi.com/2227-9091/2/3/260
Keywords
risk management diversification systemic risk expected shortfall stochastic model

Citations

No citations found. To add a citation, contact the admin at info@scimatic.org

Comments

No comments yet. Be the first to comment on this article.