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Register a new userHow dark is the dark side of diversification?
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Added by
Pedro Cadenas Dr.
Publication date
2020
fields
Financial
and research's language is
English
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Against the widely held belief that diversification at banking institutions contributes to the stability of the financial system, Wagner (2010) found that diversification actually makes systemic crisis more likely. While it is true, as Wagner asserts, that the probability of joint default of the diversified portfolios is larger; we contend that, as common practice, the effect of diversification is examined with respect to a risk measure like VaR. We find that when banks use VaR, diversification does reduce individual and systemic risk. This, in turn, generates a different set of incentives for banks and regulators.
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We consider a generic dark photon that arises from a hidden $U(1)$ gauge symmetry imposed on right-handed neutrinos ($ u_{R}$). Such a $ u_{R}$-philic dark photon is naturally dark due to the absence of tree-level couplings to normal matter. However, loop-induced couplings to charged leptons and quarks are inevitable, provided that $ u_{R}$ mix with left-handed neutrinos via Dirac mass terms. We investigate the loop-induced couplings and find that the $ u_{R}$-philic dark photon is not inaccessibly dark, which could be of potential importance to future dark photon searches at SHiP, FASER, Belle-II, LHC 14 TeV, etc.
We test the hypothesis that interconnections across financial institutions can be explained by a diversification motive. This idea stems from the empirical evidence of the existence of long-term exposures that cannot be explained by a liquidity motive (maturity or currency mismatch). We model endogenous interconnections of heterogenous financial institutions facing regulatory constraints using a maximization of their expected utility. Both theoretical and simulation-based results are compared to a stylized genuine financial network. The diversification motive appears to plausibly explain interconnections among key players. Using our model, the impact of regulation on interconnections between banks -currently discussed at the Basel Committee on Banking Supervision- is analyzed.
An accurate assessment of the risk of extreme environmental events is of great importance for populations, authorities and the banking/insurance/reinsurance industry. Koch (2017) introduced a notion of spatial risk measure and a corresponding set of axioms which are well suited to analyze the risk due to events having a spatial extent, precisely such as environmental phenomena. The axiom of asymptotic spatial homogeneity is of particular interest since it allows one to quantify the rate of spatial diversification when the region under consideration becomes large. In this paper, we first investigate the general concepts of spatial risk measures and corresponding axioms further and thoroughly explain the usefulness of this theory for both actuarial science and practice. Second, in the case of a general cost field, we give sufficient conditions such that spatial risk measures associated with expectation, variance, Value-at-Risk as well as expected shortfall and induced by this cost field satisfy the axioms of asymptotic spatial homogeneity of order $0$, $-2$, $-1$ and $-1$, respectively. Last but not least, in the case where the cost field is a function of a max-stable random field, we provide conditions on both the function and the max-stable field ensuring the latter properties. Max-stable random fields are relevant when assessing the risk of extreme events since they appear as a natural extension of multivariate extreme-value theory to the level of random fields. Overall, this paper improves our understanding of spatial risk measures as well as of their properties with respect to the space variable and generalizes many results obtained in Koch (2017).
We discuss our recently proposed interpretation of the discrepancy between the bottle and beam neutron lifetime experiments as a sign of a dark sector. The difference between the outcomes of the two types of measurements is explained by the existence of a neutron dark decay channel with a branching fraction 1%. Phenomenologically consistent particle physics models for the neutron dark decay can be constructed and they involve a strongly self-interacting dark sector. We elaborate on the theoretical developments around this idea and describe the efforts undertaken to verify it experimentally.
We propose a model which unifies the Left-Right symmetry with the $SU(3)_L$ gauge group, called flipped trinification, and based on the $SU(3)_Cotimes SU(3)_Lotimes SU(3)_Rotimes U(1)_X$ gauge group. The model inherits the interesting features of both symmetries while elegantly explaining the origin of the matter parity, $W_P=(-1)^{3(B-L)+2s}$, and dark matter stability. We develop the details of the spontaneous symmetry breaking mechanism in the model, determining the relevant mass eigenstates, and showing how neutrino masses are easily generated via the seesaw mechanism. Viable dark matter candidates can either be a fermion, a scalar or a vector, leading to potentially different dark matter phenomenology.
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