Journal of Risk

Farid AitSahlia
Warrington College of Business, University of Florida

The present issue of The Journal of Risk includes an analysis of nonstatic risk aggregation and the related problem of capital allocation, as well as empirical studies evaluating credit risk and systemic risk in emerging countries. In the issue’s first paper, “Allocating and forecasting changes in risk”, Daniel Gaigall considers the joint distribution of a portfolio’s values on two different dates and its effect on portfolio risk allocation. In particular, the author’s analysis identifies which of the covariance, conditional expectation and conditional value-at-risk principles satisfy the axioms of full allocation, risk-free allocation and symmetry, both for risk and for change in risk. Using simulation, Gaigall illustrates further the forecasting interaction between changes in the risk of a portfolio and those associated with its individual components./p>

Next, in “The impacts of financial and macroeconomic factors on financial stability in emerging countries: evidence from Turkey’s nonperforming loans”, Mustafa Tevfik Kartal, Fatih Ayhan and Merve Altaylar evaluate the financial stability of an emerging country through nonperforming loans. Kartal et al assess in particular the effects of financial and macroeconomic indicators as well as the Covid-19 pandemic. They find that unemployment, currency exchange rates and economic growth have significant impacts, but that credit volume and risk-weighted assets have an even more pronounced effect.

In the third paper in the issue, “Insurance institutional shareholding and banking systemic risk contagion: an empirical study based on a least absolute shrinkage and selection operator–vector autoregression high-dimensional network”, Xiaotong Song, Tiancai Xing and Xiaoyi Li assess the role of insurance funds in the transmission of systemic risk in the Chinese markets. Through a network-based approach, Song et al show empirically that traditional insurance and so-called dividend insurance play a stabilizing role that mitigates the impact of the banks. They attribute this phenomenon to the particular structure of both the insurance and banking industries in China.

In our final paper, “Asymmetric risk spillovers between oil and the Chinese stock market: a Beta-skew-t-EGARCH-EVT-copula approach”, Jiusheng Chen studies the interaction between the stock market and oil prices in China, which at times in recent history has been the largest importer of crude oil. Using a copula-conditional valueat- risk measure, Chen finds the spillover effect from the Chinese stock market to the crude oil market to be more pronounced.