Risk aversion is a key element of utility maximizing hedge strategies; however, it has typically been assigned an arbitrary value in the literature. This paper instead applies a GARCH-in-Mean (GARCH-M) model to estimate a time-varying measure of risk aversion that is based on the observed risk...

We characterize a firm as a nexus of activities and projects with their associated cashflows. Production and operations activities and real risk management activities distribute cashflows over states of nature and time periods, leading to a transformation possibility frontier similar to a...

Did fair value accounting play a role in the current financial crisis? This appendix explores the issue. Fair value accounting implies that assets and liabilities get measured and reflected on a firm`s financial statements at their market value, or close substitutes. Extensive academic research...

Did fair value accounting play a role in the current financial crisis? This appendix explores the issue. Fair value accounting implies that assets and liabilities get measured and reflected on a firm`s financial statements at their market value, or close substitutes. Extensive academic research...

Notwithstanding the domain of activities where they are conducted, projects often entail risks, and risk management has been widely recognized as a success factor in project management. While several lists of risk factors have been proposed in several domains, there exists no generic tool for...

Value-at-Risk (VaR) and Expected Shortfall (ES) are increasingly used in portfolio risk measurement, risk capital allocation and performance attribution. Financial risk managers are therefore rightfully concerned with the precision of typical VaR and ES techniques. The purpose of this paper is...

This paper examines the choice of tools for managing a firm’s operational risks: cash reserves, insurance contracts, and financial assets under an optimal financing contract that solves moral hazard between insiders and outside investors. Risk management is valuable as it reduces the costs of...

Purpose –This paper aims to explore the possible use of credit derivatives by corporate treasurers. Corporations have, in recent years, grown comfortable with the idea of using traditional derivative products to hedge their exposure to, for example, interest rate and foreign exchange risk....

Purpose –The paper surveys the risks and rewards of asset securitisation and illustrates how this structured finance technique can lift credit constraints to small- and medium-sized enterprises (SMEs) as banks to turn more conservative in their lending in response to more risk-sensitive...

Purpose –Financial institutions have been subject to minimum capital requirements for considerable time while other companies do not face any such regulation. This paper investigates the capital requirements of companies and how it should relate to the assets of a company....