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Financial Markets Uncertainty and the Rawlsian Argument for Central Counterparty Clearing of OTC Derivatives

McNamara, Steven R. - 2014

Persistent link: https://www.econbiz.de/10013064621

Uncertainty, Information Acquisition and Price Swings in Asset Markets

Mele, Antonio - 2018

This paper analyzes costly information acquisition in asset markets with Knightian uncertainty about the asset fundamentals. In these markets, acquiring information not only reduces the expected variability of the fundamentals for a given distribution (i.e., risk). It also mitigates the...

Persistent link: https://www.econbiz.de/10012940746

Financial markets with trade on risk and return

Smith, Kevin - 2019

In this paper, I develop a model in which risk-averse investors possess private information regarding both a stock's expected payoff and its risk. These investors trade in the stock and a derivative whose payoff is driven by the stock's risk. In equilibrium, the derivative is used to speculate...

Persistent link: https://www.econbiz.de/10012244489

Risk Budgeting in Financial Firms and The Value of an Expert Opinion

Vega San Martin, Diego - 2020

We analyze the role of risk limits in the provision of incentives to acquire valuable information for efficient risk management. We study the optimal contract of a trader who (a) must privately exert costly effort in order to collect information and (b) may have access to a costly second opinion...

Persistent link: https://www.econbiz.de/10012853461

Cheap Talk with Multiple Experts and Uncertain Biases

Karakoç, Gülen - 2020

A decision-maker solicits information from two partially informed experts and then makes a choice under uncertainty …. The experts can be either moderately or extremely biased relative to the decision-maker, which is their private … information. I investigate the incentives of the experts to share their private information with the decision-maker and analyze …

Persistent link: https://www.econbiz.de/10014093182

The impact of political risks on financial markets : evidence from a stock price crash perspective

Ma, Yanping; Wei, Qian; Gao, Xiang - In: International Journal of Financial Studies : open … 12 (2024) 2, pp. 1-16

Political risk, one of the most significant uncertainty shocks, affects firms' future attitudes toward risks and plays a crucial role in their decision making. A stock price crash risk is a classical topic in financial markets; therefore, this paper probes the relationship between firm-level...

Persistent link: https://www.econbiz.de/10014636314

Risk, Uncertainty and Monetary Policy

Bekaert, Geert - 2015

The VIX, the stock market option-based implied volatility, strongly co-moves with measures of the monetary policy stance. When decomposing the VIX into two components, a proxy for risk aversion and expected stock market volatility (“uncertainty”), we find that a lax monetary policy decreases...

Persistent link: https://www.econbiz.de/10013039100

Financial Markets, the Real Economy, and Self-Fulfilling Uncertainties

Benhabib, Jess - 2019

We develop a general equilibrium model of informational interdependence between financial markets and the real economy, linking economic uncertainty to information production and aggregate economic activities. The mutual learning between financial markets and the real economy creates a strategic...

Persistent link: https://www.econbiz.de/10012902208

Contingent Capital : The Case for COERCs

Pennacchi, George G. - 2019

In this paper we propose a new security, the Call Option Enhanced Reverse Convertible (COERC). The security is a form of contingent capital, i.e. a bond that converts to equity when the market value of equity or capital falls below a certain trigger. The conversion price is set significantly...

Persistent link: https://www.econbiz.de/10012905933

Risk Capital Allocation under Market Liquidity Constraints

Al Janabi, Mazin A. M. - 2021

We develop measures of certain kinds of liquidity trading risk that is useful for completing the definition of market risk and for predicting liquidity-adjusted VaR (L-VaR) under illiquid market conditions. We argue that asset liquidity risk associated with the uncertainty of liquidating...

Persistent link: https://www.econbiz.de/10013227399