The government support of financial firms through direct assistance and programs to improve market liquidity during the worldwide financial crisis of 2007-2008 is unprecedented since the Great Depression. Whether a given firm is ex-ante ‘Too Big To Fail' in the mind of government agents is not...

During recent years heightened standards for board audit committee membership has been imposed by the SEC, NYSE and others. Sarbanes-Oxley requires that the Audit Committee will be comprised solely of independent directors, and that the company must disclose whether at least one of the members...

What market features of Credit Defaults Swaps (CDS) exacerbate counterparty risk? To answer this, we formulate a model which elucidates key differences between these and traditional insurance contracts. First, we allow for insurer insolvency with asymmetric information as to its probability. We...

Unpredictable events – like an infrastructure failure such as a blackout (e.g. the 1999 southern Brazil blackout or the northeast blackout of 2003 that occurred in the US and Canada), a large-scale financial crisis with deep consequences on the real economy (e.g. the Icelandic and the Greek...

This brief is actually going to have two levels. One level will go with the advertised title, and I’ll tell you my current views on the truth about moral hazard and adverse selection. Adverse selection will serve as somewhat of a handmaid of moral hazard, as you will see. That’s one level....

At the invitation of Virginia Senator George Barker, Professor Pearson testified before the Commonwealth of Virginia, Division of Legislative Service, Virginia Housing Commission for a working group on continuing care retirement communities (CCRCs). In her oral and written testimony, she...

This paper estimates insurance requirements against natural disasters (NDs) in the Eastern Caribbean Currency Union (ECCU) using an insurance layering framework. The layers include a government saving fund, as well as market instruments. Each layer is calibrated to cover estimated fiscal cost of...

We analyze the Solvency II standard formula (SF) for capital risk aggregation in relation to the treatment of operational risk (OR) capital. We show that the SF implicitly assumes that the correlation between OR and the other risks is very high, a situation which seems to be at odds with both,...

Historical VaR, CVaR and ES (Expected Shortfall) to LIQUIDATION Software is a model characterized by its straightforwardness, allowing regulators measure risk using a standard database of primitive factors and portfolio positions only, leaving little error margin in comparing market risk for...

FINRA registered representatives – commission securities salespeople – have come to be known as financial “advisors,” but are not required to generally put customers' interests ahead of their own compensation and other interests, as are agents of fiduciary Registered Investment Advisors....