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...

This paper develops a theory of capital allocation in opaque financial intermediaries. The model endogenizes risk management and capital structure decisions, and it provides a simple setting within which to address questions relating to capital budgeting, performance measurement, and employee...

SUBJECT AREAS: equity index funds, total return swaps, index-linked notes, index futures, implementation costs (transaction costs, custody fees, withholding taxes), portable alpha.CASE SETTING: 1992, U.S.SYNOPSISBEA's enhanced index fund product uses derivatives and cash market securities to...

This paper examines the basic mechanisms in the financial system that function to manage the risks and costs associated with the clearing and settlement of securities transactions. Transactions risk arises because of failure to consummate a trade, perhaps because the buyer could not arrange...

Fundamental indexers argue that capitalization weighting is an inferior investment strategy because it necessarily invests more in overvalued stocks and less in undervalued stocks. This article shows that this claim is false. Capitalization weighting does not, by itself, create a performance drag

In February 2010, Jane Mendillo, CEO of Harvard Management Company, was reflecting on the list of issues facing Harvard University's endowment in preparation for the upcoming board meeting. The recent financial crisis had vividly highlighted several key issues including the adequacy of...

Dollarama is the leading operator of dollar stores in Canada. The firm performed extraordinarily well after a leveraged buyout in 2004, and recently executed a highly successful IPO. The company sources its goods primarily from Asia. It has strong brand recognition and competitive advantages in...