In this study we provide empirical evidence demonstrating a relationship between the nature of the assets and the primary market spread. The model also provides predictions on how other pricing characteristics affect spread, since little is known about how and why spreads of asset-backed...

We investigate the question of whether sophistication in risk management fosters banking stability. We compare a simple banking system in which an average rating is used with a sophisticated banking system in which banks are able to assess the default risk of entrepreneurs individually. Both...

Modern monetary policymakers consider a huge amount of information in their evaluation of events and contingencies. However, most research on monetary policy relies on simple rules, and one relevant underpinning for this choice is the good empirical fit of the Taylor rule. This paper challenges...

What triggers extreme exchange-rate returns? Though news is the source of volatility in standard theoretical models, in reality volatility is often unrelated to news. This paper shows that extreme exchange-rate returns -- and, more generally, high kurtosis of returns -- are statistically...

Empirical evidence suggests that people’s risk-perceptions are often systematically biased. This paper develops a simple framework to analyse public policy when this is the case. Expected utility (well-being) is shown to depend on both objective and subjective risks. The latter are important...

Much psychological evidence suggests that people’s risk-perceptions are biased. This paper assumes that public policy should intrinsically be concerned with people’s expected welfare, rather than their preferences, which sometimes implies a degree of paternalism. Still, expected welfare...

In this note it is argued that the estimation error in Value-at-Risk predictors gives rise to underestimation of portfolio risk. We propose a simple correction and find in an empirical illustration that it is economically relevant.

The new NYSE rules for corporate governance require the audit committee to discuss and review the firm's risk assessment and hedging strategies. They also put additional requirements for the composition and the financial knowledge of the directors sitting on the board and on the audit committee....

Risk is an integral part of financial intermediation. Hence, risk management must be at the heart of finance. However, it is disturbing to note that systematic risk management is still not as widespread as it should be in the microfinance industry. Except for a few flagship microfinance...

This paper provides an empirical analysis of risk handling arrangements adopted in the relationship between the venture capital investor and his investee. The theoretical framework adopted is principal-agent analysis, which views the investee as a risk averse agent entering into a risk sharing...