Weighted Sums of Subexponential Random Variables and Asymptotic Dependence between Returns on Reinsurance Equities

J.L. Geluk () and Casper de Vries
Additional contact information
J.L. Geluk: Faculty of Economics, Erasmus Universiteit Rotterdam

No 04-102/2, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: Suppose are independent subexponential random variables with partial sums. We show that if the pairwise sums of the ’s are subexponential, then is subexponential and . The result is applied to give conditions under which as , where are constants such that is a.s. convergent. Asymptotic tail probabilities for bivariate linear combinations of subexponential random variables are given. These results are applied to explain the joint movements of the stocks of reinsurers. Portfolio investment and retrocession practices in the reinsurance industry expose different reinsurers to the same subexponential risks on both sides of their balance sheets. This implies that reinsurer’s equity returns can be asymptotically dependent, exposing the industry to systemic risk.

Published in Insurance, Mathematics and Economics . (2006, 38, 39-56.)

Keywords: Subexponentiality; regular variation; systemic risk; asymptotic dependence (search for similar items in EconPapers)
Date: 2004-09-20
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://papers.tinbergen.nl/04102.pdf (application/pdf)

Related works:
Journal Article: Weighted sums of subexponential random variables and asymptotic dependence between returns on reinsurance equities (2006)
Working Paper: Weighted sums of subexponential random variables and asymptotic dependence between returns on reinsurance equities (2004)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20040102

Access Statistics for this paper

More papers in Tinbergen Institute Discussion Papers from Tinbergen Institute Contact information at EDIRC.
Bibliographic data for series maintained by Tinbergen Office +31 (0)10-4088900 ().