Dynamic Time Warping Algorithm in Modeling Systemic Risk in the European Insurance Sector

Entropy

Stanisław Wanat¹  Anna Denkowska¹ 

[1] Department of Mathematics, Cracow University of Economics, ul. Rakowicka 27, 31-510 Kraków, Poland;

关键词: time series analysis;    minimum spanning trees;    topological indicators of the MST;    dynamic times warping;    insurance sector;    systemic risk;   

DOI  :  10.3390/e23081022

来源: DOAJ

【 摘 要 】

We are looking for tools to identify, model, and measure systemic risk in the insurance sector. To this aim, we investigated the possibilities of using the Dynamic Time Warping (DTW) algorithm in two ways. The first way of using DTW is to assess the suitability of the Minimum Spanning Trees’ (MST) topological indicators, which were constructed based on the tail dependence coefficients determined by the copula-DCC-GARCH model in order to establish the links between insurance companies in the context of potential shock contagion. The second way consists of using the DTW algorithm to group institutions by the similarity of their contribution to systemic risk, as expressed by DeltaCoVaR, in the periods distinguished. For the crises and the normal states identified during the period 2005–2019 in Europe, we analyzed the similarity of the time series of the topological indicators of MST, constructed for 38 European insurance institutions. The results obtained confirm the effectiveness of MST topological indicators for systemic risk identification and the evaluation of indirect links between insurance institutions.

【 授权许可】

Unknown