We argue that risk sharing motivates the bank-wide structure of bonus pay. In the presence of financial frictions that … make external financing costly, the optimal contract between shareholders and employees involves some degree of risk … to rationalize exclusively with incentive theories of bonus pay---but support an important risk sharing motive …

This paper examines a simple basis risk model based on correlated geometric Brownian motions. We apply quadratic … criteria to minimize basis risk and hedge in an optimal manner. Initially, we derive the Föllmer–Schweizer decomposition for a … European claim. This allows pricing and hedging under the minimal martingale measure, corresponding to the local risk …

implement risk management in the real world …

governments, businesses, and individuals can better manage risk in our contemporary world. Goldin and Mariathasan assert that the …. The recent financial crisis exemplifies the new form of systemic risk that will characterize the coming decades, and the … authors provide the first framework for understanding how such risk will function in the twenty-first century. Goldin and …

if the risk aversion is beyond a certain level. …