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Measuring insurers’ investment risk taking with asymmetric tail dependencies

Gene C. Lai, Erin P. Lu (), Haijun Li and Dennis C. Chen
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Gene C. Lai: Washington State University
Erin P. Lu: Shenzhen University
Haijun Li: Washington State University
Dennis C. Chen: Optimus Capital

Risk Management, 2017, vol. 19, issue 1, 1-31

Abstract: Abstract This paper provides a new measurement of investment risk taking for the U.S. life insurers and illustrates the computational results. We use a modified portfolio value-at-risk approach, which is based on disaggregated market values of twenty-one types of assets and accounted for dependencies among downside risks of assets, to calculate the respective portfolio risk for 28 mutual insurers and 135 stock insurers over the period from 2007 to 2009. We find more than half of the life insurers in our sample reduced their portfolio risk during the 2008–2009 financial crisis.

Keywords: Investment risk taking; Life insurance industry; Skewed-t copula; Value-at-risk (search for similar items in EconPapers)
Date: 2017
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