There has been a long debate about whether speculators are stabilizing or not.We consider a model where speculators have a stabilizing role in normal times,but may also provoke large risk panics. The very feature that makes arbitrageursliquidity providers in normal times, namely their tolerance...

We present and compare two dierent approaches to conditional riskmeasures. One approach draws from convex analysis in vector spaces andpresents risk measures as functions on Lp spaces, while the other approachutilizes module-based convex analysis where conditional risk measures aredened on Lp...

It is well known that mean-variance portfolio selection is a time-inconsistent optimalcontrol problem in the sense that it does not satisfy Bellman’s optimalityprinciple and therefore the usual dynamic programming approach fails. We developa time-consistent formulation of this problem, which...

This paper studies the effects that heterogeneous multiple bank financing hason a firm’s risk- and information-policy, particularly with respect to credit rene-gotiation efficiency. We find that a significant, yet limited, degree of relationshiplending enables firms with high asset specificity...

Within the last decade, credit risk management of financial institutions has been subject to major changes due to the development of the credit derivatives market. In the past, financial institutions merely had the possibility to manage their credit portfolio by either approving or refusing a...

Investment decisions of cooperative banks are very restricted to their risk capacity. A well defined and organised Risk Management Process supports those investment activities and assists to achieve a balanced situation between risk and return.Several ways can be chosen to allocate risk capital....

In May 2004 the CFO Forum harmonized the various efforts of reporting the embedded valueof life insurance companies by issuing the European Embedded Value (EEV) Principles.In this working paper a methodology is proposed to derive a maximum lending amountfrom EEV figures without much additional...

The aim of portfolio insurance strategies is to put a floor on the value of a stock portfolio byprogressively selling stocks and buy safe, short-term debt securities as stock prices fall. Thispaper analyzes the current static and dynamic methods in use and explains their pros andcons.

Underlyings of weather derivatives in Europe tend to be average temperaturecompared to heating (cooling) day in the USA because of a smaller volatility intemperature. The derivatives are priced using as burn analysis. Using a gas utilitycompany, hedging techniques are shown using temperature...

We consider the modelling of credit migration risk and the pricing of migration derivativesour approach enlarges the traditional setup where credit risk is based on default solely.We implement the Regime Shifting Markov Mixture model developed in Andersson (2007)and Andersson and Vanini (2008)...