How Much Cash Is At Risk In U.S. Non-Financial Firms? A VaR-Type Measurement

Risk management techniques first developed by, and for, banks are now being adopted by non-financial corporations. However, while firms are already engaged in activities intended to develop their risk management practices, they often do not possess risk measures focused on key corporate financial results such as earnings or cash flow. The main contribution of this paper is to develop a cash flow-based risk measure conditional on specific company-level factors. With U.S. firm-level data, we present evidence that Cash Flow-at-Risk and Expected shortfall differ across main non-financial industries. Our results call for renewed attention to the role that VaR-type measures for cash flow can play in empirical studies dedicated to corporate risk analysis, and with respect to corporate-level risk management purposes

Risk And Return: New Insights For Theory, Measurement And Management

This study investigates the risk-return relationship by using an ordinal strategic risk measure of risk rather than the more conventional variance-based measures. A set of hypotheses is specified linking ordinal strategic risk, return, and organizational slack. Empirical results are interesting in that they allow elaborating the idea that strategic risk may have a positive effect on subsequent performance and that performance has a negative effect on subsequent risk. Such a self-correcting cycle offers an interesting contrast to the “vicious circle” proposed by previous risk-return research based on prospect theory. Overall, this paper suggests that new conceptual and methodological risk approaches are needed to better understand the risk taking process in organizations

Creating Value Through Enterprise Risk Management

The traditional risk management approach has been characterized as a highly disaggregated method of managing financial risks. Recently, risk management has evolved from a narrow, insurance based view to a holistic; all risk encompassing view, commonly termed Enterprise Risk Management (ERM). Financial risks are inherent in financial markets and their management represents one of the main tasks in the business of financial institutions. Enterprise Risk Management enables management to effectively deal with uncertainty and associated risk and opportunity, enhancing the capacity to build value. In contrast to the existing finance literature, this paper emphasizes the practical issues related to the adoption of an ERM framework for strategic decision-making in banks. The aim is to provide an extensive guide to the implementation issues faced by banks that are in the process of implementing fully integrated risk management systems and capabilities

Copulas In Finance Ten Years Later

Copula functions are mathematical tools that have been used in finance for approximately ten years. Their main selling point is to separate the dependence function (copula) from the marginal distributions. A little over a decade after the rise of copula modelling in finance, this article provides an initial assessment of their application in financial contexts. More specifically, the main purpose of this paper is to contribute to an ongoing debate in the field: the choice of copulas. Through an empirical study of two composite stock indices (S&P 500 and CAC 40) daily returns over the period 2002-2011, we show that this methodological challenge is still unsolved. With this in view, we suggest a method that enables to capture implicitly the empirical dependence structure without assuming any specific parametric form for it

Physically Versus Synthetically Replicated Trackers: Is There A Difference In Terms Of Risk?

This article presents the two methods of constructing exchange traded funds and questions whether investors should privilege one structure over the other. To do so, the authors detail the sources of tracking error and risks inherent in each method. As synthetically-created funds include an additional dimension of risk, the authors seek to determine to what measure investors are compensated for this added risk

Credit Spreads And Systematic RiskIn The U.S. Banking Industry - A Neural Network Model Approach

This paper shows that systematic risk in the U.S. banking industry displayed historical responsiveness to variations in the AAA-Baa credit spread. Critically, through the development of a series of single hidden layer perceptron neural network models, the principal credit spreads in the fixed income market catalyzed a defined regime shift in systematic risk proximate the financial crisis, and was more influential to the quantification of realized systematic risk than the statistical specifications of beta. As an intriguing result of the learned model simulations, the beta slope coefficients for the largest banks in the study exhibited significant acceleration in the statistical dependence on credit spread variations

Racial differences in systemic sclerosis disease presentation: a European Scleroderma Trials and Research group study

Objectives. Racial factors play a significant role in SSc. We evaluated differences in SSc presentations between white patients (WP), Asian patients (AP) and black patients (BP) and analysed the effects of geographical locations.Methods. SSc characteristics of patients from the EUSTAR cohort were cross-sectionally compared across racial groups using survival and multiple logistic regression analyses.Results. The study included 9162 WP, 341 AP and 181 BP. AP developed the first non-RP feature faster than WP but slower than BP. AP were less frequently anti-centromere (ACA; odds ratio (OR) = 0.4, P < 0.001) and more frequently anti-topoisomerase-I autoantibodies (ATA) positive (OR = 1.2, P = 0.068), while BP were less likely to be ACA and ATA positive than were WP [OR(ACA) = 0.3, P < 0.001; OR(ATA) = 0.5, P = 0.020]. AP had less often (OR = 0.7, P = 0.06) and BP more often (OR = 2.7, P < 0.001) diffuse skin involvement than had WP.AP and BP were more likely to have pulmonary hypertension [OR(AP) = 2.6, P < 0.001; OR(BP) = 2.7, P = 0.03 vs WP] and a reduced forced vital capacity [OR(AP) = 2.5, P < 0.001; OR(BP) = 2.4, P < 0.004] than were WP. AP more often had an impaired diffusing capacity of the lung than had BP and WP [OR(AP vs BP) = 1.9, P = 0.038; OR(AP vs WP) = 2.4, P < 0.001]. After RP onset, AP and BP had a higher hazard to die than had WP [hazard ratio (HR) (AP) = 1.6, P = 0.011; HR(BP) = 2.1, P < 0.001].Conclusion. Compared with WP, and mostly independent of geographical location, AP have a faster and earlier disease onset with high prevalences of ATA, pulmonary hypertension and forced vital capacity impairment and higher mortality. BP had the fastest disease onset, a high prevalence of diffuse skin involvement and nominally the highest mortality

Performance boursière rendement/risque et mode de diversification

This paper analyses the relationship between diversification strategy, firm's market-based performance measured in terms of the risk-return trade-off and value creation. Results from a sample of 41 French industrial diversified firms indicate that unrelated strategy yields a better risk-return performance and creates more value than related strategy.diversification;return;risk;value creation.

L'influence des fluctuations boursières sur la performance financière de la firme diversifiée

Based on a sample of 70 French industrial firms, this paper analyses the market-based performance of diversified firms by including the stock market environment. The findings show that unrelated diversifiers outperform related ones during bearish markets, and that there is no significant performance difference between these two strategies during bullish markets. Finally, this paper suggests the importance of explicitly considering the stock market background in the study of diversification-performance relationship.related/unrelated diversification; market-based performance;bearish/bullish markets