choose their portfolio risk, bank size, and capital holdings. Banks voluntarily hold equity when the buffer effect against … the risk of default outweighs the cost advantages of debt financing. In the optimum, banks with lower monitoring costs are … to make higher-risk portfolios more attractive. Accounting for banks’ interior capital choices can thus explain why …

We argue that risk sharing motivates the bank-wide structure of bonus pay. In the presence of financial frictions that … make external financing costly, the optimal contract between shareholders and employees involves some degree of risk … to rationalize with incentive theories of bonus pay - but support an important risk sharing motive. In particular …

We develop a financial-economic model for carbon pricing with an explicit representation of decision making under risk … specifications. We show that risk associated with high damages in the long term leads to stringent mitigation of carbon dioxide … emissions in the near term. Our results provide insight into how a systematic incorporation of climate-related risk influences …

We adapt structural models of default risk to take into account the special nature of bank assets. The usual assumption … consequences for banks' risk dynamics and distance to default estimation. Due to the payoff non-linearity, bank asset volatility … volatility is assumed to be constant can severely understate banks' default risk in good times when asset values are high. Bank …

Using Credit Default Swap spreads, we construct a forward-looking, market-implied carbon risk factor and show that … carbon risk affects firms’ credit spread. The effect is larger for European than North American firms and varies … to carbon risk when market-wide concern about climate change risk is elevated. Finally, lenders expect that adjustments …

, since retrading allows partial insurance of idiosyncratic risk in an incomplete markets setting. This lowers the issuers … idiosyncratic risk rises during recessions, so does the value of the service flows bestowing the safe asset with a negative ß. This …

This paper considers a simple model of credit risk and derives the limit distribution of losses under different … results obtained indicate that if firm-specific risk exposures (including their default thresholds) are heterogeneous but come … from a common parameter distribution, for sufficiently large portfolios there is no scope for further risk reduction …

In this paper we use an experiment to compare a theory of risk aversion and a theory of spite as an explanation for … overbidding in auctions. As a workhorse we use the second-price all-pay and the first-price winner-pay auction. Both risk and … spite can be used to rationalize deviations from risk neutral equilibrium bids in auctions. We exploit that equilibrium …

We develop a novel firm-level measure of cybersecurity risk using textual analysis of cybersecurity-risk disclosures in … corporate filings. The measure successfully identifies firms extensively discussing cybersecurity risk in their 10-K, displays … intuitive relations with quantitative measures of cybersecurity risk disclosure language, exhibits a positive trend over time …