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on Risk Management |
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Issue of 2013‒03‒02
seven papers chosen by |
| By: | Jaume Belles-Sampera (Faculty of Economics, University of Barcelona); Montserrat Guillén (Faculty of Economics, University of Barcelona); Miguel Santolino (Faculty of Economics, University of Barcelona) |
| Abstract: | We propose a new family of risk measures, called GlueVaR, within the class of distortion risk measures. Analytical closed-form expressions are shown for the most frequently used distribution functions in financial and insurance applications. The relationship between Glue-VaR, Value-at-Risk (VaR) and Tail Value-at-Risk (TVaR) is explained. Tail-subadditivity is investigated and it is shown that some GlueVaR risk measures satisfy this property. An inter-pretation in terms of risk attitudes is provided and a discussion is given on the applicability in non-financial problems such as health, safety, environmental or catastrophic risk management. |
| Keywords: | Risk measures, Distortion, Subadditivity, Tails, Risk appetite JEL classification: C60, C46, D81 |
| Date: | 2013–02 |
| URL: | http://d.repec.org/n?u=RePEc:ira:wpaper:201302&r=rmg |
| By: | International Monetary Fund |
| Keywords: | Financial system stability assessment;Financial sector;Banks;Basel Core Principles;Bank supervision;Stress testing;Liquidity management;Bank resolution;Insurance supervision;Capital markets;Pensions;Risk management;Armenia; |
| Date: | 2013–01–11 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:13/10&r=rmg |
| By: | International Monetary Fund |
| Keywords: | Bank supervision;Banking sector;Credit risk;Financial soundness indicators;Risk management; |
| Date: | 2011–11–29 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:11/334&r=rmg |
| By: | Chris Kenyon; Andrew Green |
| Abstract: | Changes in collateralization have been implicated in significant default (or near-default) events during the financial crisis, most notably with AIG. We have developed a framework for quantifying this effect based on moving between Merton-type and Black-Cox-type structural default models. Our framework leads to a single equation that emcompasses the range of possibilities, including collateralization remargining frequency (i.e. discrete observations). We show that increases in collateralization, by exposing entities to daily mark-to-market volatility, enhance default probability. This quantifies the well-known problem with collateral triggers. Furthermore our model can be used to quantify the degree to which central counterparties, whilst removing credit risk transmission, systematically increase default risk. |
| Date: | 2013–02 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1302.4595&r=rmg |
| By: | Speranza, Mauro; Garcia Fronti, Javier I. |
| Abstract: | This introductory note discusses the calculation of value at risk (VaR) of a company with two departments. The problem is analysed under two scenarios and compared. Firstly, the problem is studied under the assumption of normality of the distribution and, secondly, the calculation is made assuming fat tails using extreme value theory.  |
| Keywords: | VAR, economic capital, risk management |
| JEL: | G2 G3 |
| Date: | 2013–01–30 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:44318&r=rmg |
| By: | Haas, Armin; Onischka, Mathias; Fucik, Markus |
| Abstract: | In the past decades, risk management in the financial community has been dominated by data-intensive statistical methods which rely on short historical time series to estimate future risk. Many observers consider this approach as a contributor to the current financial crisis, as a long period of low volatility gave rise to an illusion of control from the perspectives of both regulators and the regulated. The crucial question is whether there is an alternative. There are voices which claim that there is no reliable way to detect bubbles, and that crashes can be modeled as exogenous black swans. Others claim that dragon kings, or crashes which result from endogenous dynamics, can be understood and therefore be predicted, at least in principle. The authors suggest that the concept of Bayesian risk management may efficiently mobilize the knowledge, comprehension, and experience of experts in order to understand what happens in financial markets. -- |
| Keywords: | risk management,financial market regulation,Bayesian inference,Black Swan,risk assessment |
| JEL: | C11 G32 D81 G18 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ifwedp:201311&r=rmg |
| By: | Julia Kraus; Philippe Bertrand; Rudi Zagst |
| Abstract: | The purpose of this article is to introduce, analyze and compare two performance participation methods based on a portfolio consisting of two risky assets: Option-Based Performance Participation (OBPP) and Constant Proportion Performance Participation (CPPP). By generalizing the provided guarantee to a participation in the performance of a second risky underlying, the new strategies allow to cope with well-known problems associated with standard portfolio insurance methods, like e.g. the CPPI cash lock-in. This is especially an issue in times of market crisis. However, the minimum guaranteed portfolio value at the end of the investment horizon is not deterministic anymore, but subject to systematic risk instead. With respect to the comparison of the two strategies, various criteria are applied such as comparison of terminal payoffs and payoff distributions. General analytical expressions for all moments of both performance participation strategies as well as standard OBPI and CPPI are derived. Furthermore, dynamic hedging properties are examined, in particular classical delta hedging. |
| Date: | 2013–02 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1302.5339&r=rmg |