This project explores capital markets risk exposure from water use in key industrial sectors in the Great Lakes region, represented by a subset of the region's largest companies and water users. The largest industrial water users in the Great Lakes region include (in decreasing order):...

The Basel Committee of Banking Supervision has recently set out the revised standards for minimum capital requirements for market risk. The Committee has focused, among other things, on the two key areas of moving from Value-at-Risk (VaR) to Expected Shortfall (ES) and considering a...

This article develops a Hedging Algebraic Model (HAM) for equity index portfolios with stock index futures as an alternative to econometric models (OLS, ECM, and GARCH) and assesses the efficacy of the model when applied to the IBEX 35 for the period 2007-2015. The model is initially formulated...

Regardless of the distributions of spot and futures returns, the hedge ratio determined by minimizing the portfolio's Aumann and Serrano (2008) index of riskiness is always smaller than the hedge ratio determined by minimizing the portfolio's variance. It is also demonstrated that the Foster and...

The significant excess of the price of risk, research question in the version paper, [S. Chule, in Applied Mathematical Finance, submitted June 2016], is space-domain form re-evaluated into the stochastic problem objective of the premium risk. The adapts of the conventional generic replication...

Because levered equity is an option on the firm, variations in asset idiosyncratic risk (ivol) induces a negative relationship between equity ivol and expected returns. We show that the effect is caused by the nonlinear payoff of equity and the law of one price, and is present in all but...

The square-root-of-time rule (SRTR) has been used in previous Basel market risk framework to scale one day Value-at-Risk (VaR) to 10-day VaR and is extended to expected shortfall (ES) with multiple liquidity horizons in the latest Fundamental Review of the Trading Book (FRTB) Internal Model...

Currency total return swaps (CTRS) are hybrid derivatives instruments that allow to simultaneously hedge against credit and currency risks. We develop a structural credit risk model to evaluate CTRS premia. Empirical test on a sample of 23,005 price observations from 59 underlying issuers yields...

This paper studies dynamic risk taking by a risk-averse manager who receives a bonus; the company may default on its contractual obligations (debt, fixed compensation). We show that risk-taking is time-independent, and is summarized by the so-called risk-aversion of derived utility. We highlight...

A mechanical rebalancing strategy, such as a monthly or quarterly reallocation towards fixed portfolio weights, is an active strategy. Winning asset classes are sold and losers are bought. During crises, when markets are often trending, this can lead to substantially larger drawdowns than a...