Systemic Risk and Diversification Across European Banks and Insurers

Journal of Banking & Finance, Vol. 37, 2013, p. 773-785

Tinbergen Institute Discussion Paper No. 2005-110/2

38 Pages Posted: 15 Dec 2005 Last revised: 21 Feb 2013

See all articles by Jan Frederik Slijkerman

Jan Frederik Slijkerman

AEGON Asset Management

Dirk Schoenmaker

Rotterdam School of Management, Erasmus University; Erasmus Research Institute of Management (ERIM); Centre for Economic Policy Research (CEPR)

Casper G. de Vries

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE); Tinbergen Institute; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: December 7, 2005

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.

Keywords: Financial conglomerates, Banking, Insurance, Diversification, Extreme Value Theory

JEL Classification: G21, G22, G28, C49

Suggested Citation

Slijkerman, Jan Frederik and Schoenmaker, Dirk and De Vries, Casper, Systemic Risk and Diversification Across European Banks and Insurers (December 7, 2005). Journal of Banking & Finance, Vol. 37, 2013, p. 773-785, Tinbergen Institute Discussion Paper No. 2005-110/2, Available at SSRN: https://ssrn.com/abstract=869944 or http://dx.doi.org/10.2139/ssrn.869944

Jan Frederik Slijkerman

AEGON Asset Management ( email )

P.O. Box 202
2501 CE The Hague
Netherlands

Dirk Schoenmaker

Rotterdam School of Management, Erasmus University ( email )

P.O. Box 1738
Room T08-21
3000 DR Rotterdam
Netherlands

HOME PAGE: http://www.rsm.nl/people/dirk-schoenmaker/

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Casper De Vries (Contact Author)

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands
+31 10 408 8956 (Phone)
+31 10 408 9147 (Fax)

Tinbergen Institute

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands
+31 10 408 8956 (Phone)
+31 10 408 9147 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

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