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Static Mitigation of Volumetric Risk
Id Brik, Rachid - 2015
We consider the problem of designing a financial instrument aimed at mitigating the joint exposure to random price and volume delivery fluctuations of energy-linked commitments. We formulate a functional optimization problem over a set of regular pay-off functions: one is written on energy...
Persistent link: https://www.econbiz.de/10013012273
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Hedging Size Risk : Theory and Application to the US Gas Market
Roncoroni, Andrea - 2017
Many corporate commitments exhibit a combined financial exposure to both market prices and idiosyncratic size components (e.g., volume, load, or business turnover). We design a customized contract to optimally mitigate the risk of joint fluctuations in price and size terms. The hedge is sought...
Persistent link: https://www.econbiz.de/10012969111
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Bank Interest Rate Risk Management
Vuillemey, Guillaume - 2017
Empirically, bank equity value is decreasing in the interest rate. Yet (i) many banks do not hedge interest rate risk and (ii) above 50% of hedging banks use derivatives to increase exposure. We model a bank's capital structure, and show that these facts are consistent with optimal hedging under...
Persistent link: https://www.econbiz.de/10012971207
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CAROs : Climate risk-adjusted refinancing operations
Böser, Florian; Colesanti Senni, Chiara - 2021 - This Version: June 2, 2021
Policy makers have argued that markets are not pricing climate risk appropriately yet, which may lead to a misallocation of resources and financial instability. Climate riskadjusted refinancing operations (CAROs) conducted by the central bank are one possible instrument to address this issue....
Persistent link: https://www.econbiz.de/10012544313
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Yield Curve Investing : Optimizing Risk-Adjusted Returns
Corcoran, Charles - 2013
adjusted for duration, a measure of interest rate risk. Prior to the 2007-2008 rate decrease, one-year Treasuries offered the …
Persistent link: https://www.econbiz.de/10013090162
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The demand for long-term mortgage contracts and the role of collateral
Liu, Lu - 2023
Long-term fixed-rate mortgage contracts protect households against interest rate risk, yet most countries have relatively short interest rate fixation lengths. Using administrative data from the UK, the paper finds that the choice of fixation length tracks the life-cycle decline of credit risk...
Persistent link: https://www.econbiz.de/10014309040
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Modelling Italian Bank Retail Interest Rates Under an Error Correction Framework : Implications for Banking Risk Management
Curcio, Domenico - 2011
The treatment of demand loans and deposits is crucial in measuring a bank's actual exposure to the interest rate risk in the banking book. The repricing gap model, the most popular approach to measure this kind of risk, is based on a maturity/repricing schedule, according to which...
Persistent link: https://www.econbiz.de/10013131052
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Duration Risks of Value-at-Risk
Osband, Kent - 2020
typically borrow short to lend long. This is known as duration mismatch. To mitigate the risks, banks are required to hold … outliers given static risks and not enough on the possibility that risks themselves are perceived to surge. For long duration … defaults.Standard capital buffers cannot reliably cover these markdowns. Readjusting buffer requirements to duration and …
Persistent link: https://www.econbiz.de/10012828143
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Risk management of savings accounts
Džmuráňová, Hana; Teplý, Petr - 2014
This paper deals with the risk management of savings accounts. Savings accounts are non-maturing accounts bearing a relatively attractive rate of return and two embedded options: a customer's option to withdraw money at any time and a bank's option to set the deposit as it wishes. The risk...
Persistent link: https://www.econbiz.de/10010344157
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Risk management of interest rate derivative portfolios : a stochastic control approach
Kiriakopoulos, Konstantinos; Koulis, Alexandros - In: Journal of risk and financial management : JRFM 7 (2014) 4, pp. 130-149
In this paper we formulate the Risk Management Control problem in the interest rate area as a constrained stochastic portfolio optimization problem. The utility that we use can be any continuous function and based on the viscosity theory, the unique solution of the problem is guaranteed. The...
Persistent link: https://www.econbiz.de/10011552973