Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2005-12-08
Number: 05-110/2
Author-Name: Jan Frederik Slijkerman
Author-Email: JSlijkerman@AEGON.NL
Author-Workplace-Name: Faculty of Economics, Erasmus Universiteit Rotterdam
Author-Name: Dirk Schoenmaker
Author-Email: d.schoenmaker@minfin.nl
Author-Workplace-Name: Vrije Universiteit Amsterdam, and Ministry of Finance, The Hague
Author-Name: Casper de Vries
Author-Email: cdevries@few.eur.nl
Author-Workplace-Name: Faculty of Economics, Erasmus Universiteit Rotterdam
Title: Risk Diversification by European Financial Conglomerates
Abstract: We study the dependence between the downside risk of European banks and insurers. Since the downside risk of banks and insurers differs, an interesting question from a supervisory point of view is the risk reduction that derives from diversification within large banks and financial conglomerates. We discuss the limited value of the normal distribution based correlation concept, and propose an alternative measure which better captures the downside dependence given the fat tail property of the risk distribution. This measure is estimated and indicates better diversification benefits for conglomerates versus large banks.
Classification-JEL: G21; G22; G28; C49
Keywords: Financial conglomerates; Banking; Insurance; Diversification; Extreme Value Theory
File-Url: https://papers.tinbergen.nl/05110.pdf
File-Format: application/pdf
File-Size: 1015054 bytes
Handle: RePEc:tin:wpaper:20050110