A large shareholder who undertakes costly effort to improve a firm's dividends faces a tradeoff. Selling shares will likely lower the share price (as the market anticipates a reduction in effort), while holding the shares implies a less diversified investment portfolio. Moreover, in a dynamic...

We analyze the optimal trading and ownership policy of a large shareholder who must trade off diversification and monitoring incentives. Without commitment, the problem is similar to durable goods monopoly: the share price today depends on expected future trades. We show that the large...

In accordance with Basel Capital Accords, the Capital Requirements (CR) for market risk exposure of banks is a nonlinear function of Value-at-Risk (VaR). Importantly, the CR is calculated based on a bank’s actual portfolio, i.e. the portfolio represented by its current holdings. To tackle...

In this paper, we study the drivers of permanent and transitory deposit dollarization for a sample of CESE countries using panel cointegration techniques. The results suggest that a positive cointegration relationship exists between permanent dollarization and Minimum Variance Portfolio (MVP)...

We analyze the size dependence and temporal stability of firm bankruptcy risk in the US economy by applying Zipf scaling techniques. We focus on a single risk factor - the debt-to-asset ratio R - in order to study the stability of the Zipf distribution of R over time. We find that the Zipf...

We propose a novel method of Mean-Capital Requirement portfolio optimization. The optimization is performed using a parallel framework for optimization based on the Non-dominated Sorting Genetic Algorithm II. Capital requirements for market risk include an additional stress component introduced...