88,327 research outputs found
Stockholder and Bondholder Reactions To Revelations of Large CEO Inside Debt Holdings: An Empirical Analysis (CRI 2009-005)
We conduct an event study of stockholdersâ and bondholdersâ reactions to companiesâ initial reports of their CEOsâ inside debt positions, as required by SEC disclosure regulations that became effective early in 2007. Results show that bond prices rise, equity prices fall, and the volatility of both securities drops at the time of disclosures by firms whose CEOs have sizeable pensions or deferred compensation. The results indicate a transfer of value from equity toward debt, as well as an overall destruction of enterprise value, when a CEOâs inside debt holdings are large
Dynamic real-time risk analytics of uncontrollable states in complex internet of things systems, cyber risk at the edge
The Internet of Things (IoT) triggers new types of cyber risks. Therefore,
the integration of new IoT devices and services requires a self-assessment of
IoT cyber security posture. By security posture this article refers to the
cybersecurity strength of an organisation to predict, prevent and respond to
cyberthreats. At present, there is a gap in the state of the art, because there
are no self-assessment methods for quantifying IoT cyber risk posture. To
address this gap, an empirical analysis is performed of 12 cyber risk
assessment approaches. The results and the main findings from the analysis is
presented as the current and a target risk state for IoT systems, followed by
conclusions and recommendations on a transformation roadmap, describing how IoT
systems can achieve the target state with a new goal-oriented dependency model.
By target state, we refer to the cyber security target that matches the generic
security requirements of an organisation. The research paper studies and adapts
four alternatives for IoT risk assessment and identifies the goal-oriented
dependency modelling as a dominant approach among the risk assessment models
studied. The new goal-oriented dependency model in this article enables the
assessment of uncontrollable risk states in complex IoT systems and can be used
for a quantitative self-assessment of IoT cyber risk posture
Architecture-based Qualitative Risk Analysis for Availability of IT Infrastructures
An IT risk assessment must deliver the best possible quality of results in a time-eïŹective way. Organisations are used to customise the general-purpose standard risk assessment methods in a way that can satisfy their requirements. In this paper we present the QualTD Model and method, which is meant to be employed together with standard risk assessment methods for the qualitative assessment of availability risks of IT architectures, or parts of them. The QualTD Model is based on our previous quantitative model, but geared to industrial practice since it does not require quantitative data which is often too costly to acquire. We validate the model and method in a real-world case by performing a risk assessment on the authentication and authorisation system of a large multinational company and by evaluating the results w.r.t. the goals of the stakeholders of the system. We also perform a review of the most popular standard risk assessment methods and an analysis of which one can be actually integrated with our QualTD Model
Maximum Market Price of Longevity Risk under Solvency Regimes: The Case of Solvency II.
Longevity risk constitutes an important risk factor for life insurance companies, and it can be managed through longevity-linked securities. The market of longevity-linked securities is at present far from being complete and does not allow finding a unique pricing measure. We propose a method to estimate the maximum market price of longevity risk depending on the risk margin implicit within the calculation of the technical provisions as defined by Solvency II. The maximum price of longevity risk is determined for a survivor forward (S-forward), an agreement between two counterparties to exchange at maturity a fixed survival-dependent payment for a payment depending on the realized survival of a given cohort of individuals. The maximum prices determined for the S-forwards can be used to price other longevity-linked securities, such as q-forwards. The CairnsâBlakeâDowd model is used to represent the evolution of mortality over time that combined with the information on the risk margin, enables us to calculate upper limits for the risk-adjusted survival probabilities, the market price of longevity risk and the S-forward prices. Numerical results can be extended for the pricing of other longevity-linked securities
Liquidity and Asset Prices
We review the theories on how liquidity affects the required returns of capital assets and the empirical studies that test these theories. The theory predicts that both the level of liquidity and liquidity risk are priced, and empirical studies find the effects of liquidity on asset prices to be statistically significant and economically important, controlling for traditional risk measures and asset characteristics. Liquidity-based asset pricing empirically helps explain (1) the cross-section of stock returns, (2) how a reduction in stock liquidity result in a reduction in stock prices and an increase in expected stock returns, (3) the yield differential between on- and off-the-run Treasuries, (4) the yield spreads on corporate bonds, (5) the returns on hedge funds, (6) the valuation of closed-end funds, and (7) the low price of certain hard-to-trade securities relative to more liquid counterparts with identical cash flows, such as restricted stocks or illiquid derivatives. Liquidity can thus play a role in resolving a number of asset pricing puzzles such as the small-firm effect, the equity premium puzzle, and the risk-free rate puzzle.Liquidity; Liquidity Risk; Asset Prices
Attributing returns and optimising United States swaps portfolios using an intertemporally-consistent and arbitrage-free model of the yield curve
This paper uses the volatility-adjusted orthonormalised Laguerre polynomial model of the yield curve (the VAO model) from Krippner (2005), an intertemporally-consistent and arbitrage-free version of the popular Nelson and Siegel (1987) model, to develop a multi-dimensional yield-curve-based risk framework for fixed interest portfolios. The VAO model is also used to identify relative value (i.e. potential excess returns) from the universe of securities that define the yield curve. In combination, these risk and return elements provide an intuitive framework for attributing portfolio returns ex-post, and for optimising portfolios ex-ante. The empirical applications are to six years of daily United States interest rate swap data. The first application shows that the main sources of fixed interest portfolio risk (i.e. unanticipated variability in ex-post returns) are first-order (âdurationâ) effects from stochastic shifts in the level and shape of the yield curve; second-order (âconvexityâ) effects and other contributions are immaterial. The second application shows that fixed interest portfolios optimised ex-ante using the VAO model risk/relative framework significantly outperform a naive evenly-weighted benchmark over time
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