Special Issue "Risk Management Techniques for Catastrophic and Heavy-Tailed Risks"

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A special issue of Risks (ISSN 2227-9091).

Deadline for manuscript submissions: closed (1 April 2014)

Special Issue Editors

Guest Editor
Prof. Dr. Alejandro Balbás

Department of Business Administration, University Carlos III of Madrid, C/ Madrid, 126, 28903 Getafe, Madrid, Spain
Website | E-Mail
Phone: +34916249636
Interests: risk management; asset pricing; fixed income
Guest Editor
Prof. Dr. José Garrido

Department of Mathematics and Statistics, Concordia University, 1455 de Maisonneuve Blvd West, LB-921.21, Montreal, Quebec, H3G 1M8, Canada
Website | E-Mail
Phone: +1-514-7477026
Interests: risk theory; insurance statistics; credibility theory; risk measures; actuarial and financial mathematics

Special Issue Information

Dear Colleagues,

By contrast to pricing, which is about a risk average (or central tendency), risk management has to do with the risk tail events over a short-term horizon. This special issue is devoted to the specific statistical and technical challenges that result from the risk management process, such as but not restricted to: (1) how to calibrate a risk management model when historical records report no or few catastrophic tail events (sparse data)? (2) what risk measures can be used on these extreme values when their Pareto-like behaviour prevents the existence of finite means and variances?

In addition to the small number of invited papers that are to appear in this special issue, we are cordially calling for contributed research papers or proposals. We welcome high-quality research papers, review articles as well as communications related to risk management for heavy-tailed risks, in particular on the following topics:

- Catastrophic risks
- Climate change
- Environmental risks
- Operational risk
- Pandemics
- Reinsurance

Prof. Dr. Alejandro Balbás
Prof. Dr. José Garrido
Gues Editors

Submission

Manuscripts should be submitted online at www.mdpi.com by registering and logging in to this website. Once you are registered, click here to go to the submission form. Manuscripts can be submitted until the deadline. Papers will be published continuously (as soon as accepted) and will be listed together on the special issue website. Research articles, review articles as well as communications are invited. For planned papers, a title and short abstract (about 100 words) can be sent to the Editorial Office for announcement on this website.

Submitted manuscripts should not have been published previously, nor be under consideration for publication elsewhere (except conference proceedings papers). All manuscripts are refereed through a peer-review process. A guide for authors and other relevant information for submission of manuscripts is available on the Instructions for Authors page. Risks is an international peer-reviewed Open Access quarterly journal published by MDPI.

Please visit the Instructions for Authors page before submitting a manuscript. For the first couple of issues the Article Processing Charge (APC) will be waived for well-prepared manuscripts. English correction and/or formatting fees of 250 CHF (Swiss Francs) will be charged in certain cases for those articles accepted for publication that require extensive additional formatting and/or English corrections.

Keywords

  • climate change
  • heavy tailed risks
  • natural catastrophes
  • operational risk
  • pandemics
  • reinsurance
  • risk Management
  • risk measures

Published Papers (6 papers)

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Editorial

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Open AccessEditorial Special Issue on Risk Management Techniques for Catastrophic and Heavy-Tailed Risks
Risks 2014, 2(4), 467-468; doi:10.3390/risks2040467
Received: 4 November 2014 / Accepted: 5 November 2014 / Published: 14 November 2014
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Abstract
The publication of several special issues was part of the initiatives taken in 2013 to launch Risks as a new online journal. It seemed natural to devote one to this important, concrete and complex problem of managing catastrophic and heavy tailed risks. We
[...] Read more.
The publication of several special issues was part of the initiatives taken in 2013 to launch Risks as a new online journal. It seemed natural to devote one to this important, concrete and complex problem of managing catastrophic and heavy tailed risks. We received an enthusiastic response last spring to the call for invited and contributed research papers and are proud of the special issue now being published. The emphasis was put on quality rather than quantity; this special issue contains three invited and two contributed research papers. Full article
(This article belongs to the Special Issue Risk Management Techniques for Catastrophic and Heavy-Tailed Risks)

Research

Jump to: Editorial

Open AccessArticle Measuring Risk When Expected Losses Are Unbounded
Risks 2014, 2(4), 411-424; doi:10.3390/risks2040411
Received: 26 May 2014 / Revised: 5 September 2014 / Accepted: 10 September 2014 / Published: 30 September 2014
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Abstract
This paper proposes a new method to introduce coherent risk measures for risks with infinite expectation, such as those characterized by some Pareto distributions. Extensions of the conditional value at risk, the weighted conditional value at risk and other examples are given. Actuarial
[...] Read more.
This paper proposes a new method to introduce coherent risk measures for risks with infinite expectation, such as those characterized by some Pareto distributions. Extensions of the conditional value at risk, the weighted conditional value at risk and other examples are given. Actuarial applications are analyzed, such as extensions of the expected value premium principle when expected losses are unbounded. Full article
(This article belongs to the Special Issue Risk Management Techniques for Catastrophic and Heavy-Tailed Risks)
Open AccessArticle Tail Risk in Commercial Property Insurance
Risks 2014, 2(4), 393-410; doi:10.3390/risks2040393
Received: 6 April 2014 / Revised: 26 July 2014 / Accepted: 30 July 2014 / Published: 29 September 2014
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Abstract
We present some new evidence on the tail distribution of commercial property losses based on a recently constructed dataset on large commercial risks. The dataset is based on contributions from Lloyd’s of London syndicates, and provides information on over three thousand claims occurred
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We present some new evidence on the tail distribution of commercial property losses based on a recently constructed dataset on large commercial risks. The dataset is based on contributions from Lloyd’s of London syndicates, and provides information on over three thousand claims occurred during the period 2000–2012, including detailed information on exposures. We use occupancy characteristics to compare the tail risk profiles of different commercial property exposures, and find evidence of substantial heterogeneity in tail behavior. The results demonstrate the benefits of aggregating granular information on both claims and exposures from different data sources, and provide warning against the use of reserving and capital modeling approaches that are not robust to heavy tails. Full article
(This article belongs to the Special Issue Risk Management Techniques for Catastrophic and Heavy-Tailed Risks)
Open AccessArticle Joint Asymptotic Distributions of Smallest and Largest Insurance Claims
Risks 2014, 2(3), 289-314; doi:10.3390/risks2030289
Received: 25 February 2014 / Revised: 15 June 2014 / Accepted: 15 July 2014 / Published: 31 July 2014
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Abstract
Assume that claims in a portfolio of insurance contracts are described by independent and identically distributed random variables with regularly varying tails and occur according to a near mixed Poisson process. We provide a collection of results pertaining to the joint asymptotic Laplace
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Assume that claims in a portfolio of insurance contracts are described by independent and identically distributed random variables with regularly varying tails and occur according to a near mixed Poisson process. We provide a collection of results pertaining to the joint asymptotic Laplace transforms of the normalised sums of the smallest and largest claims, when the length of the considered time interval tends to infinity. The results crucially depend on the value of the tail index of the claim distribution, as well as on the number of largest claims under consideration. Full article
(This article belongs to the Special Issue Risk Management Techniques for Catastrophic and Heavy-Tailed Risks)
Open AccessArticle When the U.S. Stock Market Becomes Extreme?
Risks 2014, 2(2), 211-225; doi:10.3390/risks2020211
Received: 5 March 2014 / Revised: 5 May 2014 / Accepted: 13 May 2014 / Published: 28 May 2014
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Abstract
Over the last three decades, the world economy has been facing stock market crashes, currency crisis, the dot-com and real estate bubble burst, credit crunch and banking panics. As a response, extreme value theory (EVT) provides a set of ready-made approaches to risk
[...] Read more.
Over the last three decades, the world economy has been facing stock market crashes, currency crisis, the dot-com and real estate bubble burst, credit crunch and banking panics. As a response, extreme value theory (EVT) provides a set of ready-made approaches to risk management analysis. However, EVT is usually applied to standardized returns to offer more reliable results, but remains difficult to interpret in the real world. This paper proposes a quantile regression to transform standardized returns into theoretical raw returns making them economically interpretable. An empirical test is carried out on the S&P500 stock index from 1950 to 2013. The main results indicate that the U.S stock market becomes extreme from a price variation of ±1.5% and the largest one-day decline of the 2007–2008 period is likely, on average, to be exceeded one every 27 years. Full article
(This article belongs to the Special Issue Risk Management Techniques for Catastrophic and Heavy-Tailed Risks)
Open AccessArticle An Academic Response to Basel 3.5
Risks 2014, 2(1), 25-48; doi:10.3390/risks2010025
Received: 25 November 2013 / Revised: 9 February 2014 / Accepted: 17 February 2014 / Published: 27 February 2014
Cited by 33 | PDF Full-text (375 KB) | HTML Full-text | XML Full-text
Abstract
Recent crises in the financial industry have shown weaknesses in the modeling of Risk-Weighted Assets (RWAs). Relatively minor model changes may lead to substantial changes in the RWA numbers. Similar problems are encountered in the Value-at-Risk (VaR)-aggregation of risks. In this article, we
[...] Read more.
Recent crises in the financial industry have shown weaknesses in the modeling of Risk-Weighted Assets (RWAs). Relatively minor model changes may lead to substantial changes in the RWA numbers. Similar problems are encountered in the Value-at-Risk (VaR)-aggregation of risks. In this article, we highlight some of the underlying issues, both methodologically, as well as through examples. In particular, we frame this discussion in the context of two recent regulatory documents we refer to as Basel 3.5. Full article
(This article belongs to the Special Issue Risk Management Techniques for Catastrophic and Heavy-Tailed Risks)

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