In collateralized lending markets haircuts are used to protect the lender from the risk of loss. An important cross-sectional determinant of haircuts is the systematic risk profile of the collateral, which describes the rate at which the collateral value is expected to decline in adverse market...

This paper develops a parsimonious static model for characterizing financing terms in collateralized lending markets. We characterize the systematic risk exposures for a variety of securities and develop a simple indifference-pricing framework to value the systematic crash risk exposure of the...

We document that the risks and pre-fee returns of broad hedge fund indices can be accurately matched with simple equity index put writing strategies, which provide monthly liquidity and complete transparency over their state-contingent payoff profiles. This nonlinear risk exposure combines with...

Overall, no! We show that the level and time series variation in cash flows for most bank activities are well matched by capital market portfolios with similar interest rate and credit risk to what banks report to hold. Ignoring operating expenses, bank loans earn high returns and transaction...

SUBJECT AREAS: Insurance, Investment management, Personal finance, Risk, Risk management.In May 2006, a resident of Key West, FL had to decide whether to renew his policy to insure against hurricane damage. The policy would cost $13,000 for one year, $5,000 more than what he paid in 2005. At the...

Private equity funds tend to select small firms with low EBITDA multiples. Public equities with these characteristics have high risk-adjusted returns after controlling for common factors. Hold-to-maturity accounting of portfolio net asset value eliminates the majority of measured risk. A passive...