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Systemic risk tradeoffs and option prices

MAP20130024257
Madan, Dilip B.
Systemic risk tradeoffs and option prices / Dilip B. Madan, Wim Schoutens
Sumario: Two new indices for financial diversity are proposed. The first is aggregative and evaluates distance from a single factor driving returns. The second evaluates how fast correlation with a stock rises as the stock falls. Both measures are here risk neutral. The CRI is also compared with coVaR. These measures are negatively related and so focus attention on different aspects of systemic risk. Unlike the coVaR focused on expected losses the CRI measures the risks of increased correlation and lack of diversity in activities. The CRI also declined consistently for AIG and LEH prior to their bankruptcies indicating that the market was active in decorrelating itself from these firms
En: Insurance : mathematics and economics. - Oxford : Elsevier, 1990- = ISSN 0167-6687. - 04/03/2013 Volumen 52 Número 2 - marzo 2013
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