Systemic risk measures with markets volatility

2018/11/30 by Fei Sun, Sun, Fei, Jieming Zhou +1
Decision Sciences · Economics, Econometrics and Finance · #FOS: Economics and business #Financial Risk and Volatility Modeling #Risk Management (q-fin.RM) #Risk and Portfolio Optimization #Stochastic processes and financial applications

paper · pdf · doi:10.48550/arxiv.1812.06185

openalex publication_date 2018/11/30 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28

Abstract

Systemic risk measures are crucial for the stability of financial markets, yet classical formulations fail to capture the complexity of market volatility. We propose a new framework for systemic risk measurement on the variable-exponent Bochner-Lebesgue space L^p(⋅), where the exponent p(⋅) is a random variable rather than a deterministic constant parameter, thereby inherently encoding latent market volatility. By constructing suitable deterministic auxiliary functions and single-firm risk measures, we decompose the quantification of systemic risk in L^p(⋅) into two sequential steps, ultimately deriving its dual representations. Several examples are provided to illustrate the theoretical results.

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