Despite a considerable premium on equity with respect to risk free assets, many households do not own stocks. We ask why the prevalence of stockholding is so limited. We focus on individuals' attitudes towards risk and identify relevant factors that affect the willingness to take financial...

Volatility is the most widely-used measure of risk but its relevance is questionable in many settings. For long-term investors, short-term volatility is something they just have to live with and disregard as much as possible. Tail risks, however, are critical because, although rare by...

This paper develops a high-frequency risk measure, the Liquidity-adjusted Intraday Value at Risk (LIVaR). Our objective is to explicitly consider the endogenous liquidity dimension associated with order size. Taking liquidity into consideration when using intraday data is important because...

Pareto optimal allocations and optimal risk sharing for coherent or convex risk measures as well as for insurance prices have been studied widely in the literature. In particular, Pareto optimal allocations have been characterized by applying inf-convolution of risk measures and convex...

This paper examines and compares several standard financial structured products whose performance is based on smoothing the return of an underlying asset (e.g. financial market indices, baskets of stocks). The returns of such products are based on various averages of intermediate values of the...

The purpose of this paper is to present a comprehensive simulation study on the finite sample properties of minimum-distance and maximum-likelihood estimators for bivariate and multivariate parametric copulas. For five popular parametric copulas, classical maximum-likelihood is compared to a...

The textbook view on risk in asset management companies is summarized by Hull (Risk Management and Financial Institutions, p. 372, 2007): “For an asset manager the greatest risk is operational risk.” Using evidence from various panel regression models, we show that asset management revenues...

The internal models amendment to the Basel Accord allows banks to use internal models to forecast Value-at-Risk (VaR) thresholds, which are used to calculate the required capital that banks must hold in reserve as a protection against negative changes in the value of their trading portfolios. As...

This paper sets out a new approach to sovereign wealth and risk management, based on the theory of contingent claim analysis (CCA). To manage sovereign risk, it is essential to analyse the sovereign's balance sheet. The state has to solve an asset-liability management (ALM) problem between its...

In several countries a major factor contributing to the current economic crisis was massive borrowing to fund investment projects on the basis of, in retrospect, grossly optimistic valuations. The purpose of this paper is to initiate an approach to project valuation and risk management in which...