We address the paradox that financial innovations aimed at risk-sharing appear to have made the world riskier. Financial innovations facilitate hedging idiosyncratic risks among agents; however, aggregate risks can be hedged only with liquid assets. When risk-sharing is primitive, agents...

Being active in both the insurance sector and the banking sector, financial conglomerates intrinsically increase the interconnections between the banking sector and the insurance sector. We address two main concerns about financial conglomerates using a unique database on bilateral exposures...

Objective: The objective of this article is to study the correlations between the most important European insurers and their participation in systemic risk in the insurance sector. We compare systemic risk in different market regimes. Research Design & Methods: We use statistical clustering...

This paper provides a rationale for the macro-prudential regulation of insurance companies, where capital requirements increase in their contribution to systemic risk. In the absence of systemic risk, the formal model in this paper predicts that optimal regulation may be implemented by capital...

This paper uses three methodologies for measuring the existence of systemic risk in the Colombian banking system. The determination of its existence is based on implementing three systemic risk measures widely referenced in academic works after the subprime crisis, known as CoVaR, MES and SRISK....

One of the controversies of diversification is that it may not be beneficial to banks, as it tends to increase systemic risk. Recent theoretical and empirical work have addressed this problem. We argue, from a theoretical perspective, that this controversy ultimately depends on how risk is...