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Insurers as asset managers and systemic risk

JANUARY 29, 2018 | by Andrew Ellul, Chotibhak Jotikasthira, Anastasia Kartasheva, Christian Lundblad, Wolf Wagner | KELLEY SCHOOL OF BUSINESS – INDIANA UNIVERSITY

“Asset fire sales arguably play a critical role in the propagation of systemic risk. We propose a new mechanism whereby financial institutions' business models engender correlated asset portfolios, increasing vulnerability to fire-sales. … Given the widespread nature of potentially underfunded guarantees (e.g., pension funds), the implications of our findings are not restricted to the insurance sector.”

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