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Cyber Risk Contagion

Author

Listed:
  • Arianna Agosto

    (Department of Economics and Management, University of Pavia, Via San Felice 5, 27100 Pavia, Italy
    These authors contributed equally to this work.)

  • Paolo Giudici

    (Department of Economics and Management, University of Pavia, Via San Felice 5, 27100 Pavia, Italy
    These authors contributed equally to this work.)

Abstract

Financial technologies (fintechs) are continuously expanding, across different markets and financial services. While financial technologies bring many opportunities, such as reduced costs and extended inclusion, they also bring risks, among which include cyber risks, that are difficult to measure. One of the difficulties that arise in the measurement of cyber risks is the interdependence among cyber losses, a problem that has not yet been solved. To fill the gap, this paper proposes a multivariate model for cyber risks, based on their observed time series of counts. The time-varying intensity parameter of the model determines the probability that a cyber attack occurs, and its specification takes not only time but also sectorial interdependence into account. The effectiveness of the proposed model is demonstrated by means of a real cyber loss dataset, in which there exists time and sectorial dependence among different events.

Suggested Citation

  • Arianna Agosto & Paolo Giudici, 2023. "Cyber Risk Contagion," Risks, MDPI, vol. 11(9), pages 1-10, September.
    • Handle: RePEc:gam:jrisks:v:11:y:2023:i:9:p:165-:d:1242949
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    References listed on IDEAS

    as
    1. Heinen, Andreas & Rengifo, Erick, 2007. "Multivariate autoregressive modeling of time series count data using copulas," Journal of Empirical Finance, Elsevier, vol. 14(4), pages 564-583, September.
    2. Lando, David & Nielsen, Mads Stenbo, 2010. "Correlation in corporate defaults: Contagion or conditional independence?," Journal of Financial Intermediation, Elsevier, vol. 19(3), pages 355-372, July.
    3. Emanuel Kopp & Lincoln Kaffenberger & Christopher Wilson, 2017. "Cyber Risk, Market Failures, and Financial Stability," IMF Working Papers 2017/185, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

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