10 research outputs found
Asymptotics in the symmetrization inequality
We give a sufficient condition for i.i.d. random variables
X1,X2 in order to have P{X1-X2>x} ~ P{|X1|>x}
as x tends to infinity. A factorization property for
subexponential distributions is used in the proof. In a subsequent
paper the results will be applied to model fragility of financial
markets
Tails of subordinated laws: The regularly varying case
Suppose Xi, i = 1,2,... are i.i.d. positive random variables with d.f. F. We assume the tail d.f. F̄ = 1 - F to be regularly varying (F̄(tx)|F̄(t) → x-β,x > 0,t → ∞) with 0 x) as x → ∞ where SN = ΣN 1 Xi and N,Xi(i≥ 1) independent with Σ∞ n=0P(N = n)xn analytic at x = 1 is studied under an additional smoothness condition on F. As an application we give the asymptotic behaviour of the expected population size of an age-dependent branching process
Renewal theory for random variables with a heavy tailed distribution and finite variance
Let X-1, X-2,... X-n be independent and identically distributed (i.i.d.) non-negative random variables with a common distribution function (d.f.) F with unbounded support and EX12 < infinity. We show that for a large class of heavy tailed random variables with a finite variance the renewal function U satisfies
U(x) - x/mu - mu(2)/2 mu(2) similar to -1/mu x integral(infinity)(x) integral(infinity)(s) (1 - F(u))duds
as x -> infinity
Renewal theory for random variables with a heavy tailed distribution and finite variance
In this paper we show for a large class of heavy tailed random variables a second order asymptotic result for the well-known renewal functio
On bootstrap sample size in extreme value theory
It has been known for a long time that for bootstrapping the
probability distribution of the maximum of a sample consistently,
the bootstrap sample size needs to be of smaller order than the
original sample size. See Jun Shao and Dongsheng Tu (1995), Ex.
3.9,p. 123. We show that the same is true if we use the bootstrap
for estimating an intermediate quantile
Weighted Sums of Subexponential Random Variables and Asymptotic Dependence between Returns on Reinsurance Equities
Asymptotic tail probabilities for bivariate linear combinations of subexponential random variables are given. These results are applied to explain the joint movements of the stocks of reinsurers. Portfolio investment and retrocession practices in the reinsurance industry, for reasons of diversification, exposes different reinsurers to the same risks on both sides of their balance sheets. Assuming, in line with the industry practice that the risk drivers follow subexponential distributions, we derive (under mild conditions) when the reinsurer's equity returns are asymptotically dependent, exposing the industry to systemic risk
Convolutions of heavy-tailed random variables and applications to portfolio diversification and MA(1) time series
The paper characterizes first and second order tail behavior of convolutions of i.i.d. heavy tailed random variables with support on the real line. The result is applied to the problem of risk diversification in portfolio analysis and to the estimation of the parameter in a MA(1) model
Weak & Strong Financial Fragility
The stability of the financial system at higher loss levels is either characterized by asymptotic dependence or asymptotic independence. If asymptotically independent, the dependency, when present, eventually dies out completely at the more extreme quantiles, as in case of the multivariate normal distribution. Given that financial service firms' equity returns depend linearly on the risk drivers, we show that the marginals' distributions maximum domain of attraction determines the type of systemic (in-)stability. A scale for the amount of dependency at high loss lovels is designed. This permits a characterization of systemic risk inherent to different financial network structures. The theory also suggests the functional form of the economically relevant limit copulas
Stable Probability Distributions and their Domains of Attraction
The theory of stable probability distributions and their domains of attraction is derived in a direct way (avoiding the usual route via infinitely divisible distributions) using Fourier transforms. Regularly varying functions play an important role in the exposition