| Item Type |
Conference or Workshop Item
(Paper)
|
| Abstract |
We illustrate the existence of a “nondiversification trap” (Ibragimov, Jaffee, and Walden,2009) when portfolios of cyber risk are constructed. Portfolio diversification thus does not decrease risk, but rather increases risk. Our results help to explain the current state of cyber insurance market, which is far behind the expected market volume. Many insurance companies are reluctant to offer cyber insurance on a broad scale, because (among other reasons) they anticipate the unfavorable diversification properties. We also discuss potential ways to overcome the nondiversification trap. |
| Authors |
Schnell, Werner |
| Language |
English |
| Keywords |
Diversification Trap, Extreme Value Theory, Cyber Risk, Risk Management,Loss Distribution Approach |
| Subjects |
finance |
| HSG Classification |
contribution to scientific community |
| HSG Profile Area |
SOF - System-wide Risk in the Financial System |
| Date |
6 August 2018 |
| Event Title |
ARIA 2018 Annual Meeting |
| Event Location |
Chicago |
| Event Dates |
August 5-8, 2018 |
| References |
http://s1.goeshow.com/aria/annual/2018/conference_program_sessions.cfm |
| Depositing User |
M.Sc. Werner Schnell
|
| Date Deposited |
06 Nov 2018 12:25 |
| Last Modified |
03 Feb 2023 01:25 |
| URI: |
https://www.alexandria.unisg.ch/publications/255592 |
Extreme cyber risks and the non-diversification trap
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