This study examines the market reaction to the approval of the Nature Restoration Law, a key component of the EU Biodiversity Strategy, and its implications for biodiversity-related financial risks. Using an event study methodology, we analyze the equity price movements of companies listed in...

Global economic downturns and multiple extreme events threaten Vietnam's economy, leading to a surge in stock market risk and signifcant spillovers. This study investigates market risk spillovers and explores the asymmetric efects of macroeco‑ nomic indicators on market risk across 24 sectors...

Researchers have observed the political risk, sign paradox whereby a decrease in political risk is associated with an increase in stock market returns. However, the political risk-return relationship may be driven by a few political risk factors or emerging market countries. This paper examines...

In this research, we summarize the results of implementing market risk premium into the option valuation formulas of the Black-Scholes-Merton model for the out-of-money (OTM) options. Especially, empirical studies are conducted using the 50ETF options which are obtained from Shanghai Stock...

This paper contains the statistics of a survey about the Risk-Free Rate (RF) and the Market Risk Premium (MRP) used in 2023 for 80 countries. We got answers for 102 countries, but we only report the results for 80 countries with more than 6 answers.The paper also contains the links to previous...

We demonstrate how a mixture of two SEP3 densities (skewed exponential power distribution of Fernández et al., 1995) can model the conditional forecasting of VaR and CVaR to efficiently cover market risk at regulatory levels of 1% and 2.5%, as well as at the additional 5% level. Our data...

We propose a new method for computing a lower bound to the expected future dividend component of the market risk premium from observed option prices. We find that our estimate of future dividend yields has similar characteristics to future realized dividend yields, exhibits significant...

The 2020 COVID-19 pandemic crisis and the 2022 global energy crisis consecutive to Russia's aggression against Ukraine have been unprecedented in several aspects. In the European Union (EU), national governments, as well as European bodies put in place several relief measures to support the EU...

Purpose - This paper measures different market risk impacts on options portfolios under the new Fundamental Review of the Trading Book (FRTB) regulation, issued in Basel and coming into effect in 2023. Design/methodology/approach - This paper first suggests an algorithm for implementing the FRTB...

We present insights into novel and complex issues regarding cryptocurrency activities, the related investor protection, and blockchain market risks. Crypto digital assets embody global economic ambition with their significant growth and creativity levels. This study employs a novel research...

Amidst the global push for decarbonization, green hydrogen has gained recognition as a versatile and clean energy carrier, prompting the financial sector to introduce specialized investment instruments like Green Hydrogen Exchange-Traded Funds (ETFs). Despite the nascent nature of research on...

As finance returns to its fundamental purpose of serving the real economy, its connections with various industries are strengthening. Accurately depicting the interdependence among these industries and mitigating financial risks has become increasingly critical. The dependence among China's real...

The activity of any participant in the stock market (from a private non-professional investor to investment companies) is associated with a certain level of risk. An effective mechanism in the context of leveling investment risks can be an assessment of the investment attractiveness of stock...

The market risk premium is central in finance, and has been analyzed by numerous studies in the time-series predictability literature and by growing studies in the options literature. In this paper, we provide a novel link between the two literatures. Theoretically, we derive a lower bound on...

Scholars have roundly criticized disclosure as a regulatory regime over the past decade for good reason. Disclosures—whether describing the terms of a loan or the risks of investing—purport to inform consumers. But who actually reads disclosures? We argue that mutual fund disclosures are...

In this paper we make use of option-implied volatilities to build a time-varying implied correlation matrix. Then, we use this matrix to estimate jointly both the covariance matrix of the returns and the implied covariance matrix dynamics. Finally, we do a backtest and show that the proposed...

Market risks account for an integral part of insurers’ risk profiles. We explore market risk sensitivities of insurers in the U.S. and Europe. Based on panel regression models and daily market data from 2012 to 2018, we find that sensitivities are particularly driven by insurers’ product...

Crowding is widely regarded as one of the most important risk factors in designing portfolio strategies. In this paper, we analyze stock crowding using network analysis of fund holdings, which is used to compute crowding scores for stocks. These scores are used to construct costless long-short...

This paper presents a new Expected Shortfall (ES) model based on the Quantum Harmonic Oscillator (QHO). It is used to estimate market risk in banks and other financial institutions according to Basel III standard. Predictions of the model agree with the empirical data which displays deviations...

We define risk transfer as the percent change in the market risk exposure for a group of investors over a given period. We estimate risk transfer using novel data on U.S. investors' portfolio holdings, flows, and returns at the security level with comprehensive coverage across asset classes and...

Market participants use leveraged derivatives to gain access to equity market exposure through broker banks. Leverage and interconnectedness via overlapping portfolios of dealer banks can amplify adverse market movements, potentially causing sizeable losses. I propose a model, based on granular...

This paper proposes an aggregate index of macro tail risk and examines its role in asset pricing. We observe that a positive market risk premium compensated for the downside risk of macro fundamentals; a high tail risk predicts subsequent high returns. This predictability exists both in- and...

We decompose the excess market return into speculation and non-speculation components. The former is negative and predicted by market sentiment. The latter is positive and not predicted by sentiment. The speculation component explains roughly 30% of the variation in the excess market return. In...

This paper examines the impact of unconventional monetary policy of ECB measured by its balance sheet expansion on euro area equity market uncertainty and investors risk aversion within a structural VAR framework. An expansionary balance sheet shock decreases both risk aversion and uncertainty...

In this research study, we show how existing approaches of using generative adversarial networks (GANs) as economic scenario generators (ESG) can be extended to an entire internal market risk model-with enough risk factors to model the full band-width of investments for an insurance company and...

Under the new regulation based on Basel solvency framework, known as Basel III and Basel IV, financial institutions must calculate the market risk capital requirements based on the Expected Shortfall (ES) measure, replacing the Value at Risk (VaR) measure. In the financial literature, there are...

Value-at-risk (VaR) is an important risk measure now widely used by financial institutions and regulators to quantify market risk and compute regulatory capital charge. The performance of VaR model can be examined by back-testing. Based on back-testing information, this paper develops a Machine...

It is well-known that using arithmetic averages of yearly return observations leads to downward biased discount rates estimations. Well-known corrections, however, lead to upward biased results under the presence of negative serial correlation. Using a simulation analysis, we first show that a...

This study examines the link between market risk and equity return in Nigeria between 1980 to 2019. It employs the vector error correction model (VECM) to determine the short run dynamics and long run effect of market risk factors on stock return. The findings revealed that a dynamic...