This paper analyzes situations in which a project consisting of several activities is not realized according to plan. Ifthe project is expedited, a reward arises. Analogously, a penalty arises if the project is delayed. This paper considersthe case of arbitrary nondecreasing reward and penalty...

Internationally operating firrns naturally face the decision whether or not to hedge the currencyrisk implied by foreign investments. In a recent paper, Bos, Mahieu and van Dijk (2000) evaluatethe returns from optimal and alternative currency hedging strategies, for a series of 7 models,using...

An expected utility based cost-benefit analysis is in general fragile to its distributional assumptions. We derive necessary and sufficient conditions on the utility function of the expected utility model to avoid this. The conditions ensure that expected (marginal) utility remains finite also...

We propose a semiparametric estimator to determine the effects of explanatory variables on the conditional interquantile expectation (IQE) of the random variable of interest, without specifying the conditional distribution of the underlying random variables. IQE is the expected value of the...

We use a classic Merton credit risk framework to argue that Islamic Banking Institutions (IBIs) face less incentive to take on risks than Conventional Banking Institutions (CBI). IBIs have less incentive for risk shifting both in and outside of distress situations. We test and confirm this...

Accurate prediction of the frequency of extreme events is of primary importance in many financialapplications such as Value-at-Risk (VaR) analysis. We propose a semi-parametric method for VaRevaluation. The largest risks are modelled parametrically, while smaller risks are captured by the...

Economic problems such as large claims analysis in insurance and value-at-risk in finance, requireassessment of the probability P of extreme realizations Q. This paper provided a semi-parametricmethod for estimation of extreme (P, Q) combinations for data with heavy tails. We solve the...

We develop a novel argument why better public information can help countries to insure against idiosyncratic risk. Representative agents of developing and industrial countries receive public and private signals on their future income realization and engage in risk-sharing contracts with limited...

Various economic theories are available to explain the existence of credit and default cycles. There remains empirical ambiguity, however, as to whether or these cycles coincide. Recent papers_new suggest by their empirical research set-up that they do, or at least that defaults and credit...