Asymptotic analysis of a contagion risk measure with some dependence structures

In this paper, we focus on a system that encompasses two industry lines or legal entities. Specifically, the aggregate losses of each of the two industry lines within the system are modelled in the form of random weighted sums. We assume that the loss-profit variables of the two industry lines follow one-sided linear processes with independent step sizes. Additionally, the step sizes of the two industry lines form a sequence of independent random pairs, with each pair satisfying a condition known as strong asymptotic independence (SAI). In the presence of heavy-tailed losses, we derive asymptotic expansions for contagion risk measures. These expansions involve fixed positive integers n and m, as well as integer-valued random variables N and M. We conduct numerical studies to examine the performance of the derived asymptotic formulas. Our results capture the impact of the one-sided linear process and the dependence structures among loss-profit variables on contagion risk measures.

• Publication year

  2025

• Venue

  Stochastics

• Publication date

  2025-09-02

• Fields of study

  Not labeled

• Identifiers
  DOI 10.1080/17442508.2025.2542940
• External record

  Open on Semantic Scholar

• Source metadata

  Semantic Scholar

• No claims are published for this paper.

• No concepts are published for this paper.

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