Risk concentration and diversification: second-order properties
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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.
Recommendations
- Risk concentration of aggregated dependent risks: the second-order properties
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- Second-order expansions of the risk concentration based on CTE
- Second-order asymptotics of the risk concentration of a portfolio with deflated risks
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Cited in
(28)- Closure properties of the second-order regular variation under convolutions
- Properties of second-order regular variation and expansions for risk concentration
- Second-order asymptotics of tail distortion risk measure for portfolio loss in the multivariate regularly varying model
- Tail distortion risk measure for portfolio with multivariate regularly variation
- Risk concentration based on expectiles for extreme risks under FGM copula
- Asymptotic analysis of tail distortion risk measure under the framework of multivariate regular variation
- Diversification limit of quantiles under dependence uncertainty
- Second order corrections for the limits of normalized ruin times in the presence of heavy tails
- Superquantile/CVaR risk measures: second-order theory
- Insights to systematic risk and diversification across a joint probability distribution
- Risk concentration under second order regular variation
- Operational risk quantified with spectral risk measures: a refined closed-form approximation
- Second-order asymptotics for convolution of distributions with light tails
- Asymptotics of the risk concentration based on the tail distortion risk measure
- Risk concentration of aggregated dependent risks: the second-order properties
- Second-order properties of risk concentrations without the condition of asymptotic smoothness
- Second-order asymptotics of the risk concentration of a portfolio with deflated risks
- Asymptotic analysis of portfolio diversification
- Second-order properties of tail probabilities of sums and randomly weighted sums
- Risk measures and multivariate extensions of Breiman's theorem
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- Second order regular variation and conditional tail expectation of multiple risks
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- Theoretical sensitivity analysis for quantitative operational risk management
- Simple risk measure calculations for sums of positive random variables
- Tail asymptotic expansions for \(L\)-statistics
- Second-order expansions of the risk concentration based on CTE
- On beta-product convolutions
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