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arXiv · 2607.16601

The conditional higher moment risk measure: second-order asymptotics with FGM contagion

Haifan Hu·Bingzhen Geng·Jiajun Liu·Shijie Wang
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Abstract

This paper investigates second-order asymptotic expansions for the conditional higher moment (CoHM) coherent risk measure under a Farlie-Gumbel-Morgenstern (FGM) dependence structure, capturing a weak contagion between a primary loss risk and a reference risk. Assuming that the primary risk belongs to the Fr\'echet, Weibull, or Gumbel maximum domain of attraction, we systematically derive second-order asymptotic expansions using extreme value theory and second-order regular variation theory. Compared with existing first-order results, our refined approximations capture higher-order tail behavior and dependence effects more accurately. Numerical simulations confirm that the second-order asymptotics substantially reduce approximation errors, especially at extreme confidence levels. Empirical applications to insurance claim data further illustrate the practical superiority of the second-order approach.

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Haifan Hu, Bingzhen Geng, Jiajun Liu, Shijie Wang. 2026-07-18. The conditional higher moment risk measure: second-order asymptotics with FGM contagion. https://arxiv.org/abs/2607.16601

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