and firm financial information, I develop a firm-level measure of hoarded labor. I formalize the hypothesized risk trade …-off in a stylized model featuring demand uncertainty and uncertainty around an unrelated price risk that can be hedged at a … higher overall CF volatility; instead, it is linked to reduced foreign-exchange (FX) risk as one specific price risk. FX risk …

order to apply pricing tools of financial mathematics, one needs to isolate a Gaussian risk factor. A conventional model for … Gaussian variable appears. Earlier work investigated this temperature risk in different locations and showed that neither … accurate fitting procedure of localised temperature risk process by achieving excellent normal risk factors …

How might modern settlement systems with distributed ledger technology achieve zero settlement risk? We consider the … design of settlement systems that satisfies two integral features: information-leakage proof and zero settlement risk. Legacy …

The possibility to minimize volatility of the systematic risk while maximizing returns, is the use of an optimized buy … investments in leveraged portfolios also. The approach seems to modify the meaning of "nondiversifiable-risk" of the market risk …

We give a complete algorithm and source code for constructing what we refer to as heterotic risk models (for equities …-doll risk model construction. This appears to prove a powerful approach for constructing out-of-sample stable short …-lookback risk models. Thus, for intraday mean-reversion alphas based on overnight returns, Sharpe ratio optimization using our …

Financial institutions commonly face the risk that large trades will execute at unfavorable prices due to price impact … into smaller pieces and to trade these pieces sequentially over time. Such a strategy, however, is exposed to market risk …. Unlike price impact, market risk can be hedged. This paper explores the market risk management of the liquidation of a large …

We give a simple explicit algorithm for building multi-factor risk models. It dramatically reduces the number of or … altogether eliminates the risk factors for which the factor covariance matrix needs to be computed. This is achieved via a nested …) industry classification based risk factors (e.g., "sector -> industry -> sub-industry"), and also in the presence of (non …

haircut is typically calculated with a simple Value at Risk estimation of the collateral for the purpose of preventing the … risk associated to volatility. However, other risk factors should be included in the haircut and a severe undervaluation of … stylized model of the financial system, which allows us to compute the haircut incorporating the liquidity risk of the …

We revisit the role of liquidity risk. We successfully replicate Pastor and Stambaugh's (2003) gamma liquidity risk … index and, within their time period, concur with their risk premium estimate. An out-of-their-time-period analysis finds … compensation for liquidity risk. We create five alternative liquidity risk indices from various popular liquidity proxies. Using …

In financial decisions, model risk has been recognized as an important source of uncertainty. The revision of the Basel … II suggests that financial institutions quantify and manage their model risk. Focusing on risk forecasting literature, we … identify two main approaches to quantify model risk: the worst-case and loss function. The first approach includes measures …