We use a unique dataset of bond downgrades from a niche rating company that has been found to be reacting faster to publicly available information than its competitors. Using regime-switching models we propose risk measures to quantify stock return disturbances (distress costs) associated with...

After Hurricane Andrew the U.S. Congress entertained proposals to allow insurers to employtax-deferred loss reserves. Interest was strong at first, but as the events receded interestwaned. After the most recent hurricane seasons, interest in the proposals has rejuvenated. Weexamine the use of...

In this paper we present a conceptual framework for regulatory and policy responses to systemic risks, in light of lessons learned from the recent financial crisis. We argue that capitalism works best when it facilitates fair market discovery of prices. However, the market is imperfect; there...

This paper presents mathematical models for cyber breach probability as function of security spending in protecting a firm's ICT systems. We derive optimal level of security investment as percentage of value-at-risk. We show that the upper bound of optimal investment can be 1/e, 1/√2π or...

This paper presents analytical models for optimizing firm's cybersecurity spending and cyber insurance based on the effectiveness of spending in reducing cyber threats, vulnerability and impact, respectively. At the macro-level, the paper shows how private-sector contribution toward countering...

This paper presents economic models of cybersecurity investments by a firm, first considering the cost-benefit to the firm itself, and then to the eco-system of a supply-chain. We introduce a concept of a firm's security knowledge set of its attack surface, relative to the universe of threats....