The industrial organization approach to the microeconomics of banking augmented by uncertainty and risk aversion is … used to examine credit derivatives and macro derivatives as instruments to hedge credit risk for a large com- mercial bank …

, is the risk management of the embedded options by a tractable and realistic hedging strategy. The long maturity of life … explicitly taking into account ``model risk''. In this context, we show how to determine the contract parameters conservatively … and implement robust risk management strategies. This highlights the necessity of a careful choice of guarantees which are …

RiskMetrics, one risk management method considered as industry standard. However these assumptions are unrealistic. The primary … process is considered. A complete theory addresses both issues. In our study, we demonstrate the implementation of the … proposed method in volatility estimation and risk management given simulated and real data. Numerical results show the proposed …

This paper explores the linkage between corporate risk management strategies, investment, and economic stability in an … exposure - caused by balance sheet effects as in Krugman (2000) - and therefore their investments' sensitivity to currency risk …. We find that, depending on whether futures contracts are used for risk reduction (i.e., hedging) or risk taking (i …

In this paper we provide a review of copula theory with applications to finance. We illustrate the idea on the … allocation problems, Value-at-Risk and time series models. The paper is complemented with an extensive simulation study and an …

This paper analyzes the influence of market discipline on the risk-taking incentives of banks. It is shown that market … discipline reduces risk if banks can credibly commit to a given level of risk before the interest rate on deposits is set. If …, however, the bank can readjust the level of risk after the deposit rate is contracted, market discipline leads to an increase …

, price level and futures price and hence real wealth is stochastic. For a risk averse investor, optimal consumption and …

differential income taxation. We start with the well-known result that risk-taking may increase when income tax rates increase and … speculative hedging is. Analysing tax-sensitivity of the corporate hedge shows that a higher risk in the first place may reduce …

– game theory is a useful set of tools for better understanding different risk settings. Embedded in a short history of the …Basel II changes risk management in banks strongly. Internal rating procedures would lead one to expect that banks are … changing over to active risk control. But, if risk management is no longer a simple "game against nature", if all agents …