Systemic risk measures with markets volatility

Fei Sun and Jieming Zhou

Papers from arXiv.org

Abstract: Systemic risk measures are crucial for the stability of financial markets, yet classical formulations fail to capture the complexity of market volatility. We propose a new framework for systemic risk measurement on the variable-exponent Bochner-Lebesgue space $L^{p(\cdot)}$, where the exponent $p(\cdot)$ is a random variable rather than a deterministic constant parameter, thereby inherently encoding latent market volatility. By constructing suitable deterministic auxiliary functions and single-firm risk measures, we decompose the quantification of systemic risk in $L^{p(\cdot)}$ into two sequential steps, ultimately deriving its dual representations. Several examples are provided to illustrate the theoretical results.

Date: 2018-11, Revised 2026-02
New Economics Papers: this item is included in nep-rmg
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