Stochastic orders and distortion risk contribution ratio measures

Yiying Zhang

Insurance: Mathematics and Economics, 2024, vol. 118, issue C, 104-122

Abstract: Relative spillover effects play a crucial role in the analysis and comparison of systemic risks. This paper introduces a novel approach, referred to as distortion risk contribution ratio measures, for quantifying such effects. Various types of contribution ratio measures are defined based on the newly proposed conditional distortion risk measures by Dhaene et al. (2022), and useful integral-based representations are provided as well. An interesting equivalent characterization result for the convex transform order is also presented, which is not only relevant to proving our main results but also has independent value in other research areas. We then establish comparison results between the distortion risk contribution ratio measures of two different bivariate random vectors with either the same or different copulas. Sufficient conditions are established in terms of stochastic orders, copula functions, distortion functions, and stress levels. Furthermore, we investigate the ordering behaviors of these measures in relation to the interaction between paired risks. Numerical examples are presented to illustrate the conditions and main findings.

Keywords: Risk contribution; Ratio measure; Systemic risk; Convex transform order; Star order; Copula (search for similar items in EconPapers)
JEL-codes: G21 G22 G31 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:insuma:v:118:y:2024:i:c:p:104-122

DOI: 10.1016/j.insmatheco.2024.06.007

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