Post by Sapphire Capital on Oct 16, 2008 22:24:52 GMT 4
Enterprise Risk Management in Financial Groups: Analysis of Risk Concentration and Default Risk
Nadine Gatzert
University of St. Gallen - Institute of Insurance Economics
Hato Schmeiser
University of Muenster - Faculty of Economics
Stefan Schuckmann
Financial Markets and Portfolio Management, Vol. 22, No. 3, pp. 241-258, 2008
Abstract:
In financial groups, enterprise risk management is becoming increasingly important in controlling and managing the different independent legal entities in the group. The aim of this paper is to assess and relate risk concentration and joint default probabilities of the group's legal entities in order to achieve a more comprehensive picture of a financial group's risk situation. We further examine the impact of the type of dependence structure on results by comparing linear and nonlinear dependencies using different copula concepts under certain distributional assumptions. Our results show that even if financial groups with different dependence structures do have the same risk concentration factor, joint default probabilities of different sets of subsidiaries can vary tremendously.
papers.ssrn.com/sol3/papers.cfm?abstract_id=1269371
Nadine Gatzert
University of St. Gallen - Institute of Insurance Economics
Hato Schmeiser
University of Muenster - Faculty of Economics
Stefan Schuckmann
Financial Markets and Portfolio Management, Vol. 22, No. 3, pp. 241-258, 2008
Abstract:
In financial groups, enterprise risk management is becoming increasingly important in controlling and managing the different independent legal entities in the group. The aim of this paper is to assess and relate risk concentration and joint default probabilities of the group's legal entities in order to achieve a more comprehensive picture of a financial group's risk situation. We further examine the impact of the type of dependence structure on results by comparing linear and nonlinear dependencies using different copula concepts under certain distributional assumptions. Our results show that even if financial groups with different dependence structures do have the same risk concentration factor, joint default probabilities of different sets of subsidiaries can vary tremendously.
papers.ssrn.com/sol3/papers.cfm?abstract_id=1269371