During 2008, the sudden widening of credit spreads led to a rapid decrease in the value of many financial assets, revealing a general shortage of capital for many financial institutions, with some critical peaks that required fund injection and public bailouts.The evidence of a substantial...

The hedge funds industry has evolved tremendously in recent years. According to the CASAM CISDM Industry Report, assets under management in hedge funds had grown from less than USD 50 billion at the end of 1990 to over USD 2.1 trillion at the end of 2007. However, assets managed by hedge funds...

This paper analyses the risk and return of loans portfolios in a joint setting. I develop a model to obtain the distribution of loans returns. I use this model to describe the investment opportunity set of lenders using mean-variance analysis with a Value at Risk constraint. I also obtain closed...

The equity of too-big-to-fail banks could be deemed less risky due to implicit government guarantees. However, such guarantees could also amplify a moral hazard problem that induces large banks to take excessive risk. If such risk is mispriced by the market due to the increased complexity of...

This paper is the first to draw a global picture of worldwide microfinance equity by taking full advantage of daily quoted prices. We revisit previous findings showing that investors should consider microfinance as a self-standing sector. Our results are threefold: 1) Microfinance has become...

Assessments of market risk for economic or regulatory capital typically involve calculating a portfolio's sensitivity to key risk factor movements. Historically, practitioners have focused on two classical sources of risk, adverse changes in interest rates and volatility. As stress testing has...

Financial institutions commonly face the risk that large trades will execute at unfavorable prices due to price impact effects from insufficient market liquidity. A typical method to manage these price impact effects is to split a given order into smaller pieces and to trade these pieces...

Does risk shifting incentives or risk management incentives dominate when firms rollover large amounts of maturing debt? The empirical evidence supports the risk management hypothesis by identifying a hump-shaped relation between long-term debt maturity and firm risk. Using...

I present a dynamic general equilibrium model in which financial interconnectedness endogenously changes over the business cycle and shapes systemic risk. To share individual risks, banks become interconnected through holding overlapping asset portfolios. Diversification reduces individual...

The author's study analyzes, loan valuation methods using discrete time model of contingent claims analysis. In the empirical test, the undiversifiable risk was measured by the correlation coefficient of one borrower with the average return of all borrowers. The results of the test supported the...