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We employ an asset pricing framework with varying estimation lengths to show that there has been an increasing degree of integration between Asian and international stock markets, but very little with Japan. This finding is consistent with prior studies and highlights the impact of recent regulatory and economic reform undertaken throughout the region. Our results show that instability in the asset variance structure underpins the observed varying degrees of financial market integration. In particular, modeling integration using shorter estimation periods helps explain the time varying nature of financial market integration and the benefits that may accrue to international and domestic investors.

A stylized market risk model is studied. It turns out that quantifying risk by quantile-VaR, coherent risk measures or other functionals that are positively homogeneous, has a consequence akin to assuming multi-normal returns, namely a two fund separation property. Heuristic arguments indicate that this may be a source of systemic risk to the financial industry.

In this paper, we develop a stochastic model for future monthly spot prices of the most important crude oils and refined products. The model is easy to calibrate to both historical data and views of a user even in the presence of negative prices which have been observed recently. This makes it particularly useful for risk management and design of optimal hedging strategies in incomplete market situations where perfect hedging may be impossible or prohibitively expensive to implement. We illustrate the model with optimization of hedging strategies for refinery margins in illiquid markets using a portfolio of 12 most liquid derivative contracts with 12 maturities traded on New York Mercantile Exchange (NYMEX) and Intercontinental Exchange (ICE).

This paper examines the risk-relevance of the Basel capital regulations in Taiwan. We investigate (1) whether the regulatory information can explain bank risk, (2) whether the new 1998 version provides incremental information to assess bank risk, given the old 1992 version, and (3) which regulatory version is more useful in assessing bank risk. This paper employs an option pricing methodology to calculate implied asset risk as a proxy for total risk. We find that the Basel capital ratio and its components help explain risk and that the components under the new version have incremental explanatory power over those under the old. Additionally, the new version has greater information regarding risk than the old. Finally, two risk dimensions categorized by supervisors, credit risk and market risk have different explanatory power. Regulatory information about credit risk has explanatory power, but market risk does not. It implies that the Basel accord, contrary to expectation, does not fully capture all risk. Overall, this study contributes to capturing the risk-relevance of the ongoing evolution of the Basel capital regulations in an emerging market economy.

Financial market instability and losses driven by changes in stock prices, currencies, interest rates, and other factors are the primary causes of economic risk. One of the risk types with the highest priority for every business is financial risk. The consumer electronics manufacturing sector’s focus on rising technology is driving important growth and includes manufacturers of smartwatches, stylish home products, and smart speakers. Risks can arise from the inability to meet functional requirements and business expectations throughout the life cycle, from original formation to final disposal, while supplying competitive electronic products. All of this highlights the necessity and potential of thorough study in the field of financial risk in economic growth. With the help of owners and managers of top electronic manufacturing industries in India, this study’s goal is to examine and evaluate several aspects of financial risk in economic benefits. The main factors of the financial risk covered under the study include liquidity risk, market risk, credit risk, and operational risk. Financial risks also arise from a combination of macroeconomic factors, including changing interest rates on the market and the potential for default by sizable businesses or industries. Financial stability is of the utmost importance to a commercial enterprise to maintain its position and status in the commercial environment. All of this demonstrates the value and need for rigorous research in the area of financial risk affecting the performance of the organization. This study intends to analyze several components of financial risk in consumer electronic goods manufacturers in India. Various aspects discussed in the study revolving around financial risk management are an important factor and demand the maximum attention of the organization.

Based on the annual data of internal control weakness during 2008–2012, this paper empirically analyzes Chinese listed firms’ internal control weakness and its influence on the risks and performance of banks. The aim of this paper is to examine whether the internal control weakness have long-term information content or not. In addition, this paper examines the effect of interaction term of internal control weakness and managers’ holdings on firm’s performance and risk and improves the firm’s operation. Our results are summarized as follows: First, the disclosure of internal weakness would decrease operation risk slightly but has severe effect on future performance. Second, the blockhold would decrease the operation performance for firm disclosing internal control weakness. Finally, the increase of mangers’ holdings would decrease the operating risk, and does not decrease the operating performance. These results argue that if managers increase their stock holdings after firms disclosing the internal control weakness, they would improve the firm’s operation condition and risk management.

The purpose of this research is to examine the relationship between corporate governance and risk management of Indonesian banks. Bank risk managements are measured by market risk, credit risk, and liquidity risk. The samples used in this study were all banks registered in Indonesia during the 2010–2016 period. The data sources were obtained from the annual reports and bank financial reports. The results show that corporate governance implementation in Indonesia was able to affect credit risk and liquidity risk. There were differences in credit risk and liquidity risk in banks with different governance ratings, but not at market risk.

This chapter proposes a mixture copula framework for integration of different types of bank risks, which is able to capture comprehensively the nonlinearity, tail dependence, tail asymmetry and structure asymmetry of bank risk dependence. We analyze why mixture copula is well-suited for bank risk integration, discuss how to construct a proper mixture copula and present detailed steps for using mixture copula. In the empirical analysis, the proposed framework is employed to model the dependence structure between credit risk, market risk and operational risk of Chinese banks. The comparisons with seven other major approaches provide strong evidence of the effectiveness of the constructed mixture copulas and help to uncover several important pitfalls and misunderstandings in risk dependence modeling.

Usually, companies with poor financial conditions at the time of an epidemic issue bonds, and it is particularly important to reasonably measure the various risks associated with the issue of bonds. This paper uses the Conditional Cost at Risk (CCaR) risk measurement technology based on the Conditional Value at Risk (CVaR) idea to measure the cost risk of epidemic prevention and control bonds issued by enterprises in the western region during the epidemic. We design a Conditional Payment at Risk (CPaR) risk measurement model to measure the liquidity risk brought by the issuance of epidemic prevention and control bonds to enterprises. We also analyze the effectiveness of epidemic prevention and control bonds in the western region based on different bonds and come up with an accurate evaluation. By comparing the calculation results, it can be analyzed that the overall level of financing utility of anti-epidemic bonds issued by non-government financed enterprises in the western region is good, both in terms of the market risk of bonds and the cash liquidity risk faced by enterprises.

Using an international dataset of 5,861 firm-year observations between 2009 and 2016 obtained from the Carbon Disclosure Project (CDP), we analyze the effect of firms’ Greenhouse Gas (GHG) emissions on stock price performance. To this end, we first discuss former research which finds an equity discount entailed by high levels of GHG emissions. We then focus on additional metrics of stock price performance, namely stock price return and stock price risk. Interestingly, we do not find any significant impact of GHG emissions on these metrics. A possible explanation is that investors are not yet able to quantify the GHG emission risk due to insufficient disclosure.

The following sections are included:

• INTRODUCTION

• FOUR KEY ELEMENTS OF A DECISION

• DECISIONS BASED ON EXTREME VALUES
  • Maximin Criterion
  • Minimax Regret Criterion

• EXPECTED MONETARY VALUE AND UTILITY ANALYSIS
  • The Expected Monetary Value Criterion
  • Utility Analysis

• BAYES STRATEGIES
  • Bayesian Approach in Forecasting Interest Rates

• DECISION TREES AND EXPECTED MONETARY VALUES
  • A Decision Tree for Testing a Drilling Site
  • A Decision Tree for Capital Budgeting
  • Utilizing Sample Information to Improve the Determination of Pricing Policy⁴

• MEAN AND VARIANCE TRADE-OFF ANALYSIS
  • The Mean–Variance Rule and the Dominance Principle
  • The Capital Market Line
  • The Capital Asset Pricing Model

• THE MEAN AND VARIANCE METHOD FOR CAPITAL BUDGETING DECISIONS
  • Statistical Distribution of Cash Flow

• Summary

• Appendix 21A Using the Spreadsheet in Decision-Tree Analysis

• Appendix 21B Graphical Derivation of the Capital Market Line

• Appendix 21C Present Value and Net Present Value
  • Present Value
  • Net Present Value

• Appendix 21D Derivation of Standard Deviation for NPV

• Questions and Problems

• Project V Project for Selected Topics in Statistical Analysis

An overview of risk measurement techniques for typical energy utilities is given. Most common calculated risk measures are explained among the often simple calculation methods used in practice. For a more sophisticated risk analysis, the various model classes proposed in the literature are reviewed. A three-factor model is explained in mathematical detail and its application to the practical modeling of energy prices is shown. This includes spot and futures prices in different time resolutions as well as the calibration of such models.