Covid-19 highlighted the weaknesses in the supply chain. Many have argued that a more resilient or robust supply chain is needed. But what does a robust supply chain mean? And how do firms' decisions change when taken that approach? This paper studies a very stylized model of a supply chain,...

An important element of the cost of distance is time taken in delivering final and intermediate goods. We argue that time costs are qualitatively different from direct monetary costs such as freight charges. The difference arises because of uncertainty. Unsynchronised deliveries can disrupt...

Typical value-at-risk (VAR) calculations involve the probabilities of extreme dollar losses, based on the statistical distributions of market prices. Such quantities do not account for the fact that the same dollar loss can have two very different economic valuations, depending on business...

This paper discusses the recent changes in the market for catastrophe risk. These risks have traditionally been distributed through the insurance and reinsurance systems. However, because insurance companies tend to share relatively small amounts of their cat exposures and because insurance...

This paper addresses the question of how an institution might optimally manage the market risk of a given exposure. We provide an analytical approach to optimal risk management under the assumption that the institution wishes to minimize its Value-at-Risk (VaR) using options follows a geometric...

We develop a framework for analyzing the capital allocation and capital structure decisions facing financial institutions such as banks. Our model incorporates two key features: i) value-maximizing banks have a well-founded concern with risk management; and ii) not all the risks they face can be...

A fiscal program that redistributes income from rich to poor individuals indirectly redistributes tax revenues from regions hit by a favorable shock to regions hit by an unfavorable one. Centralized fiscal redistribution has therefore been advocated as a way to insure individuals against...

The Capital Asset Pricing Model in conjunction with the usual market model assumptions implies that well-diversified portfolios should be mean variance efficient and ,hence, betas computed with respect to such indices should completely explain expected returns on individual assets. In fact,...

This paper examines the sharing of risk under three different remedies for breach of contract. The risk considered arises from the possibility that, after a seller and buyer have entered into an agreement for the exchange of some (not generally available) good, a third party who values the good...

We develop a model of pandemic risk management and firm valuation. We introduce aggregate transmission shocks into an epidemic model and link valuations to infections via an asset-pricing framework with vaccines. Infections lower earnings growth but firms can mitigate damages. We estimate a...