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on Risk Management |
| By: | World Bank |
| Keywords: | Finance and Financial Sector Development-Insurance & Risk Mitigation |
| Date: | 2023–12 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wboper:40742 |
| By: | Vasilios Plakandaras (Department of Economics, Democritus University of Thrace, Komotini, Greece); Rangan Gupta (Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa); Qiang Ji (Institutes of Science and Development, Chinese Academy of Sciences, Beijing, China; School of Public Policy and Management, University of Chinese Academy of Sciences, Beijing, 100049, China) |
| Abstract: | The study investigates systemic financial risk in global markets, attributing it to geopolitical instability, climate risks, and economic uncertainties. Utilizing a state-of-the-art machine learning heterogeneous panel regression framework capable of capturing cross-sectional dependencies and nonlinear patterns, we examine financial stress across multiple economies, including China, the U.S., the U.K., and ten EU nations. Through extensive out-of-sample rolling window analysis, we show that while geopolitical uncertainty enhances short-term predictions, long-term risk forecasting is better achieved using financial and economic data. The study underscores the limitations of conventional regression models in capturing financial risk dynamics and suggests that machine learning-based panel regressions provide a more nuanced and accurate forecasting tool. The findings bear significant policy implications, highlighting the necessity for regulatory bodies to reassess risk frameworks and the role of climate-related disclosures in financial markets. |
| Keywords: | Systemic financial risk, machine learning, forecasting, climate risk, geopolitical risk |
| JEL: | C45 C58 G17 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:pre:wpaper:202511 |
| By: | Sedki Zaiane (National Research University Higher School of Economics) |
| Abstract: | This study investigates the impact of women on boards on bank risk-taking in the MENA context and whether a critical mass of women on boards affects bank risk. The influence of woman directors on bank risk is studied using a sample of 126 commercial banks for the period 2007–2020. A dynamic panel threshold method is adopted in order to investigate the critical mass of woman on boards and it is impact on risk. The findings suggest a nonlinear association between women on boards and bank risk-taking confirming the critical mass hypotheses. The results show that the percentage of women on the board matter in shaping risk decisions. More precisely, we find that there is a negative and significant impact only when the proportion of women exceeds a certain threshold. A set of robustness checks confirms our findings. The findings highlight the importance of achieving a critical mass of women on boards to influence corporate governance and risk management. Therefore, policies should aim to surpass the empirically determined threshold to achieve a meaningful reduction in risk-taking. While most studies on this topic either assume a specific critical percentage or treat the relationship as linear, this research uses a threshold regression model to empirically determine the threshold that goes beyond simply assuming a critical percentage. |
| Keywords: | Women on Boards, Bank Risk-Taking, Critical Mass, Panel Threshold Regression, MENA region |
| JEL: | Z |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:hig:wpaper:98/fe/2025 |
| By: | Vidal-Meliá, Carlos (Instituto Complutense de Análisis Económico (ICAE), Universidad Complutense de Madrid (Spain).) |
| Abstract: | Despite the significant economic impact associated with marital dissolution, divorce insurance remains conspicuously absent from contemporary risk management portfolios. This paper addresses this paradox by developing a multi-state, simulation-based actuarial framework that calculates risk-adjusted premiums incorporating critical demographic, economic, and behavioral variables—such as age at marriage, previous divorce history, and income disparities. Unlike previous failed attempts (notably WedLock in the USA), our model dynamically adjusts premiums to account explicitly for evolving marital and mortality risks, effectively mitigating adverse selection and moral hazard through mechanisms such as waiting periods and return-of-premium clauses. Simulation results indicate actuarially sound and market-viable premiums, highlighting divorce insurance’s potential as a financial tool complementary to existing legal arrangements like prenuptial agreements. Our findings underscore the practical feasibility and invite further exploration into overcoming market acceptance barriers and regulatory challenges. |
| Abstract: | A pesar del considerable impacto económico que conlleva la disolución matrimonial, el seguro de divorcio sigue estando notoriamente ausente de las carteras actuales de gestión de riesgos. Este estudio aborda dicha paradoja mediante el desarrollo de un modelo actuarial multiestado basado en simulaciones, diseñado para calcular primas ajustadas al riesgo e incorporar variables demográficas, económicas y conductuales fundamentales, como la edad al contraer matrimonio, el historial previo de divorcios y las disparidades de ingresos entre cónyuges entre otros factores. A diferencia de intentos anteriores fallidos (particularmente el producto WedLock en Estados Unidos), nuestro modelo ajusta dinámicamente las primas para reflejar explícitamente la evolución de los riesgos matrimoniales y de mortalidad, mitigando eficazmente problemas como la selección adversa y el riesgo moral mediante mecanismos como periodos de carencia y cláusulas de reembolsos (parciales) de primas. Los resultados de las simulaciones arrojan primas actuarialmente sólidas y potencialmente viables en el mercado, subrayando la capacidad del seguro de divorcio para complementar instrumentos legales ya existentes, como los acuerdos prenupciales. Nuestros hallazgos destacan su viabilidad práctica e invitan a profundizar en futuras investigaciones orientadas a superar las barreras regulatorias y los desafíos asociados a su aceptación en el mercado. |
| Keywords: | Actuarial modeling; Divorce insurance; Financial protection; Marital risk; Multi-state model; Premium pricing; Risk assessment. |
| JEL: | C15 D81 G22 G28 J12 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ucm:doicae:2502 |
| By: | Massimiliano Caporin (Department of Statistical Sciences, University of Padova, Via Cesare Battisti 241, 35121 Padova, Italy); Oguzhan Cepni (Ostim Technical University, Ankara, Turkiye; University of Edinburgh Business School, Centre for Business, Climate Change, and Sustainability; Department of Economics, Copenhagen Business School, Denmark); Rangan Gupta (Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa) |
| Abstract: | The objective of this paper is to analyze the time-varying degree of interconnectedness of 50 state-level stock returns and their volatility of the United States (US) while filtering out common factors and insignificant coefficients using Least Absolute Shrinkage and Selection Operator (Lasso) regularization. Based on monthly data from February 1994 to November 2024, we find that not accounting for common factors is likely to result in relatively higher spillover indexes. Our findings, beyond their academic value, have important implications for investors and policymakers. |
| Keywords: | US state-level stock indexes, returns and volatility, common factors, Lasso, spillover indexes |
| JEL: | C32 G10 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:pre:wpaper:202509 |
| By: | Andrés Alonso-Robisco (BANCO DE ESPAÑA); Andrés Azqueta-Gavaldón (BANCO DE ESPAÑA); José Manuel Carbó (BANCO DE ESPAÑA); José Luis González (BANCO DE ESPAÑA); Ana Isabel Hernáez (BANCO DE ESPAÑA); José Luis Herrera (BANCO DE ESPAÑA); Jorge Quintana (BANCO DE ESPAÑA); Javier Tarancón (BANCO DE ESPAÑA) |
| Abstract: | New technologies have made available a vast amount of new data in the form of text, recording an exponentially increasing share of human and corporate behavior. For financial supervisors, the information encoded in text is a valuable complement to the more traditional balance sheet data typically used to track the soundness of financial institutions. In this study, we exploit several natural language processing (NLP) techniques as well as network analysis to detect anomalies in the Spanish corporate system, identifying both idiosyncratic and systemic risks. We use sentiment analysis at the corporate level to detect sentiment anomalies for specific corporations (idiosyncratic risks), while employing a wide range of network metrics to monitor systemic risks. In the realm of supervisory technology (SupTech), anomaly detection in sentiment analysis serves as a proactive tool for financial authorities. By continuously monitoring sentiment trends, SupTech applications can provide early warnings of potential financial distress or systemic risks. |
| Keywords: | suptech, natural language processing, machine learning, network analysis, sentiment |
| JEL: | C63 D81 G21 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:bde:opaper:2504 |
| By: | Aras, Atilla |
| Abstract: | Constructing theorems can help to determine the shape of certain utility curves that make up the new definitions in financial markets. The aim of this study was to present proofs for these theorems. Basic thoughts of new alternative definitions emerge from the decision-making under uncertainty in economics and finance. Shape of the certain utility curve is central to standard definitions in determining risk attitudes of investors. Shape alone determines risk behavior of investors in standard theory. Although the terms “risk-averse, ” “risk-loving, ” and “risk-neutral” are equivalent to “strict concavity, ” “strict convexity, ” and “linearity, ” respectively, in standard theory, strict concavity or strict convexity, or linearity are valid for certain new definitions, not being the same as standard theory. Hence, it can be stated that new alternative definitions are broader than standard definitions from the viewpoint of shape. For instance, the certain utility curve of a risk-averse investor can be strict concave or strict convex, or linear in alternative definitions. |
| Date: | 2023–09–06 |
| URL: | https://d.repec.org/n?u=RePEc:osf:osfxxx:yac7z_v1 |