Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/86348
Authors: 
Geluk, J.L.
de Vries, C.G.
Year of Publication: 
2004
Series/Report no.: 
Tinbergen Institute Discussion Paper 04-102/2
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.
Subjects: 
Subexponentiality
regular variation
systemic risk
asymptotic dependence
Document Type: 
Working Paper

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