This paper provides an empirical analysis of risk handling arrangements adopted in the relationship between the venture capital investor and his investee. The theoretical framework adopted is principal-agent analysis, which views the investee as a risk averse agent entering into a risk sharing...

Financial institutions such as banks are ultimately exposed to macroeconomic fluctuations I the countries to which they have exposure, the most acute example being commercial lending to companies whose fortunes fluctuate with aggregate demand. This risk management need for financial institutions...

In this, the third paper in the Economists’ Hubris series, we highlight the shortcomings of academic thought in developing models that can be used by financial institutions to institute effective enterprise-wide risk management systems and policies. We find that pretty much all of the models...

As shown in the recent BCBS papers market and credit risks could reinforce each other in certain circumstances, meaning the sum of the parts might be less than an estimate of risk that takes into account the interactions between the two. Market risk factors have an ambiguous impact on the firms'...

Global players in the financial markets have discovered that excellent knowledge of the portfolio structure and the associated risks is a clear competitive advantage, and some have even started to focus their business on managing risky portfolios — not without considerable success, as this...

The development of the capital markets increases the key role of the financial manager both in using the new techniques for administrating the risks and in assessing hedge effectiveness. Risk means possible uncertainty regarding cash flows, influencing the fair value of assets and liabilities or...

In this study we provide empirical evidence demonstrating a relationship between the nature of the assets and the primary market spread. The model also provides predictions on how other pricing characteristics affect spread, since little is known about how and why spreads of asset-backed...

The intense innovational activity typical of the financial sector in the last 30 years requires households to have increasingly comprehensive and complex financial knowledge. The main objective of our study, therefore, was to assess and evaluate risk management activity, which is an integral...

The risk culture of financial organizations is a popular area of focus at the current time, with regulators, advisory organizations, professional/trade institutes and financial organizations themselves all providing their view on the subject. However, despite the wealth of commentary there...

We criticize the popular view that separately calculating regulatory capital for market and credit risk yields a conservative aggregate risk assessment. We show that this view depends on a flawed intuition about diversification effects that arise between subportfolios. If a bank’s portfolio...