Tax legislation, fiscal authorities, and tax courts create tax uncertainty by frequent tax reforms and various different interpretations of the tax law. Moreover, investors generate model-specific tax uncertainty by using simplified models that anticipate the actual tax base incorrectly. I...

In this paper we investigate the interaction between a credit portfolio and another risk type, which can be thought of as market risk. Combining Merton-like factor models for credit risk with linear factor models for market risk, we analytically calculate their interrisk correlation and show how...

Auf Grundlage unabhängiger Ertragserwartungen einzelner Assets wird ein Ansatz zur Optimierung eines Anlagemix abgeleitet. Das erwartete Risiko wird dadurch gemindert unter anderem auch durch Einbeziehung von Anlagen mit schwachen Ertragserwartungen in Baissezeiten.

Auf Grundlage unabhängiger Ertragserwartungen einzelner Assets wird ein Ansatz zur Optimierung eines Anlagemix abgeleitet. Das erwartete Risiko wird dadurch gemindert unter anderem auch durch Einbeziehung von Anlagen mit schwachen Ertragserwartungen in Baissezeiten.

The real options tradition originally predicted a decreasing relationship between uncertainty and investment, through the positive effect of higher uncertainty on the trigger level for revenue relative to costs. An opposing effect on the probability of reaching the level has been identified,...

The problem of irreversible investment with idiosyncratic risk is studied by interpreting market incompleteness as a source of Knightian uncertainty over the appropriate discount factor. Maxmin utility over multiple priors is used to solve the irreversible investment problem. The notion of...

The valuation of multi-staged pharmaceutical R&D can be interpreted as a chain of real options. In valuing these compound option models, a crucial problem is how to deal with the different types of risk. Previous models, such as Cassimon et al. (2004), offer a closed-form solution for the...

We develop an analytical framework that divides the contribution of pension risk to the total systematic risk of the firm into two parts: (1) the risk due to the investment strategy of the pension plan (“Mismatch Risk”); and (2) the risk due to the funded status of the pension plan...

This paper solves the dynamic investment problem of a risk averse agent compensated with a performance related bonus plus a salary guaranteed up to a certain level of underperformance. The main contribution is to explicitly take into account the financial fragility of the principal [employer],...

We study risk-shifting behavior in a laboratory experiment, a setup that overcomes methodological hurdles faced by empiricists in the past. The participants are high-level managers. We observe risk shifting in a simple setup, but less in a setup with a continuation value. Reputation effects also...