The theory of regulatory compliance has enabled the development of differential monitoring, emphasizing tailored, impactful regulations over uniform approaches, proving crucial in risk assessment and key indicators.
This paper defines vector-valued risk measures using axioms and shows they ignore dependence structures of input random vectors, unlike set-valued risk measures. Convex vector-valued risk measures are unsuitable for capital allocation in various financial applications, including systemic risk measures. The results also generalize to conditional settings.
The paper empirically analyzes the ECB's climate-risk-related supervisory efforts' impact on banks' climate risk exposure, management, and green finance activities. Using a difference-in-difference setup, it finds significant improvements in climate risk management and increased green finance among Significant Institutions under the Single Supervisory Mechanism since 2020.
This paper explores methods to measure and adjust for country risk, sovereign default risk, and equity risk premiums. The paper argues that a company's exposure to country risk should be based on its operations rather than incorporation location, affecting valuations of multinational corporations.
The significance of mortality modeling extends across multiple research areas, including life insurance valuation, longevity risk management, life-cycle hypothesis, and retirement income planning. A new vitality-based mortality modeling approach is introduced, addressing limitations in existing methods. This four-component framework analyzes individual vitality dynamics, defining mortality as vitality depletion. The model demonstrates versatility in estimation and analysis, with implications for actuarial problems and various research areas, offering an improved paradigm for mortality modeling.
“We find suggestive evidence indicating that some firms manipulate the discovery date (“misreport”) of a cybersecurity incident to postpone the disclosure of the incident, as evidenced by a pronounced spike in insider sales before the reported discovery date. We also find that misreporting is more prevalent among firms with weak internal control systems, when firms face low litigation risk, and when firms have greater pressure to meet a disclosure deadline.”
This paper introduces a multivariate sparse multiscale Bernstein polynomial model for copula dependence structures, utilizing a Bayesian spike-and-slab prior. The method enhances efficiency by preserving significant components, reducing computational demands, and enabling practical applications in multivariate density estimation, particularly for financial risk forecasting.
Increasing climate risk has made insurance unaffordable or unavailable in many areas. A study on Australia's government-provided, mandatory reinsurance for cyclone damage shows it decreases home insurance premiums by 21% and increases availability by 11%. The policy reduces costs associated with correlated risks and boosts market competition.
Banking regulations encourage banks to invest in "risk-free" government bonds, affecting financial stability. This study reveals governments exploit this to increase fiscal flexibility. Zero-risk weighting of sovereign bonds lowers borrowing costs, promotes over-borrowing, and undermines fiscal rules.
“Effective regulation is cyclical, aligning with economic cycles, but it is counter to the laissez-faire approach. We demonstrate that simple leverage constraints can bring the decentralized economy close to the optimal allocation.”