AbstractThis chapter aims to provide a conceptual framework on risk and uncertainty, with the goal of helping the reader gain a better understanding of how risk is measured and managed. Beginning with Luca Pacioli until the recent development in the discipline of risk management, the theoretical...

AbstractThe following sections are included:Systemic Risk and the Financial Crisis of 2007 to 2009Regulating Systemic RiskObstacle 1: Measuring Systemic RiskObstacle 2: Implementing the Tax on Systemic RiskObstacle 3: Is Moral Hazard Solved?The Dodd-Frank Wall Street Reform and Consumer...

AbstractThe following sections are included:Equity Risk Premiums: Importance and DeterminantsWhy Does the Equity Risk Premium Matter?A price for riskExpected returns and discount ratesInvestment and policy implicationsWhat are the Determinants of Equity Risk Premiums?Risk aversion and...

AbstractThe aim of this chapter is to investigate the superiority of local modeling in the SME default risk estimation.Both “Regional” and “national” models are developed on a dataset of 4,134 enterprises allocated into three samples: a regional “in-sample” (3,137 companies), a...

AbstractConsidering the fundamental role played by small and medium sized enterprises (SMEs) in the economy of many countries and the considerable attention placed on SMEs in the new Basel Capital Accord, we develop a distress prediction model specifically for the SME sector and to analyze its...

AbstractIn our turbulent times effective risk management capabilities differentiate firms and influence performance outcomes. There is mounting recognition that effective risk management is reflected in adaptive responses that enable the firm to cope with sometimes abrupt environmental changes...

AbstractThis chapter presents a model of systematic LGD that is simple and effective. It is simple in that it uses only parameters appearing in standard models. It is effective in that it survives statistical testing against more complicated models.

AbstractWe investigate whether liquidity is an important price factor in the US corporate bond market. In particular, we focus on whether liquidity effects are more pronounced in periods of financial crises, especially for bonds with high credit risk, using a unique data set covering more than...

AbstractWe propose a totally new approach toward assessing sovereign risk by examining rigorously the health and aggregate default risk of a nation's private corporate sector. Models such as our new Z-MetricsTMapproach can be utilized to measure the median probability of default of the...

Using a sample of 2,186 credit default swap (CDS) spreads quoted in the European market during the period 2002-2009, this paper empirically analyzes which model – accounting- or market-based – better explains corporate credit risk. We find that there is little difference in the explanatory...