Risk Transfer with CDOs

2005 ◽  
Author(s):  
Jan Pieter Krahnen ◽  
Christian Wilde
Keyword(s):  
Risk Transfer

Risk Transferin Public Private Partnership/Private Finance Initiative Procurement Documents:The Differencebetween The United Kingdom and Malaysia

2016 ◽  
Vol 4 (4) ◽  
pp. 30
Author(s):  
Nooriha Abdullah ◽  
Darinka Asenova ◽  
Stephen J. Bailey
Keyword(s):  
United Kingdom ◽  
Public Procurement ◽  
Research Question ◽  
Public Private Partnership ◽  
Private Finance Initiative ◽  
Private Partnership ◽  
Risk Transfer ◽  
Private Finance ◽  
The United Kingdom ◽  
The Uk

The aim of this paper is to analyse the risk transfer issue in Public Private Partnership/Private Finance Initiative (PPP/PFI) procurement documents in the United Kingdom (UK) and Malaysia. It utilises qualitative research methods using documentation and interviews for data collection. The UK documents (guidelines and contracts) identify the risks related to this form of public procurement of services and makeexplicittheappropriateallocation of those risks between the public and the private sector PPP/PFI partners and so the types of risks each party should bear. However, in Malaysia, such allocation of risks was not mentioned in PPP/PFI guidelines. Hence, a question arises regarding whether risk transfer exists in Malaysian PPP/PFI projects, whether in contracts or by other means. This research question is the rationale for the comparative analysis ofdocumentsand practicesrelatingtorisk transfer in the PPP/PFI procurements in both countries. The results clarify risk-related issues that arise in implementing PPP/PFI procurement in Malaysia, in particular how risk is conceptualised, recognised and allocated (whether explicitly or implicitly), whether or not that allocation is intended to achieve optimum risk transfer, and so the implications forachievement ofvalue for moneyor other such objectivesinPPP/PFI.

Credit Risk Transfer and the Forecasting of Bank Defaults

2009 ◽  
Author(s):  
Giovanni Calice ◽  
Christos Ioannidis ◽  
Julian M. Williams
Keyword(s):  
Credit Risk ◽  
Risk Transfer ◽  
Credit Risk Transfer

Investments and Risk Transfers

2017 ◽  
Vol 92 (6) ◽  
pp. 1-23 ◽  
Author(s):  
Tim Baldenius ◽  
Beatrice Michaeli
Keyword(s):  
Moral Hazard ◽  
Risk Premium ◽  
Bargaining Power ◽  
Risk Premia ◽  
The Other ◽  
Investment Risk ◽  
Incomplete Contracting ◽  
Risk Transfer ◽  
Specific Investments ◽  
Division Managers

ABSTRACT We demonstrate a novel link between relationship-specific investments and risk in a setting where division managers operate under moral hazard and collaborate on joint projects. Specific investments increase efficiency at the margin. This expands the scale of operations and thereby adds to the compensation risk borne by the managers. Accounting for this investment/risk link overturns key findings from prior incomplete contracting studies. We find that if the investing manager has full bargaining power vis-à-vis the other manager, he will underinvest relative to the benchmark of contractible investments; with equal bargaining power, however, he may overinvest. The reason is that the investing manager internalizes only his own share of the investment-induced risk premium (we label this a “risk transfer”), whereas the principal internalizes both managers' incremental risk premia. We show that high pay-performance sensitivity (PPS) reduces the managers' incentives to invest in relationship-specific assets. The optimal PPS, thus, trades off investment and effort incentives.

scholarly journals Sharing Risk – An Economic Perspective

2009 ◽  
Vol 39 (2) ◽  
pp. 591-613 ◽  
Author(s):  
Andreas Kull
Keyword(s):  
Value At Risk ◽  
Risk Sharing ◽  
Risk Measures ◽  
Insurance Industry ◽  
Risk Measure ◽  
Capital Allocation ◽  
Risk Capital ◽  
Risk Class ◽  
Capital Costs ◽  
Risk Transfer

AbstractWe revisit the relative retention problem originally introduced by de Finetti using concepts recently developed in risk theory and quantitative risk management. Instead of using the Variance as a risk measure we consider the Expected Shortfall (Tail-Value-at-Risk) and include capital costs and take constraints on risk capital into account. Starting from a risk-based capital allocation, the paper presents an optimization scheme for sharing risk in a multi-risk class environment. Risk sharing takes place between two portfolios and the pricing of risktransfer reflects both portfolio structures. This allows us to shed more light on the question of how optimal risk sharing is characterized in a situation where risk transfer takes place between parties employing similar risk and performance measures. Recent developments in the regulatory domain (‘risk-based supervision’) pushing for common, insurance industry-wide risk measures underline the importance of this question. The paper includes a simple non-life insurance example illustrating optimal risk transfer in terms of retentions of common reinsurance structures.

scholarly journals Individual Property Risk Management

2010 ◽  
Vol 2010 ◽  
pp. 1-11
Author(s):  
Michael S. Finke ◽  
Eric Belasco ◽  
Sandra J. Huston
Keyword(s):  
Risk Management ◽  
Financial Planning ◽  
Optimal Choice ◽  
Excess Risk ◽  
Individual Property ◽  
Risk Transfer ◽  
Potential Gain ◽  
Theoretical Assumptions ◽  
Property Losses ◽  
Risk Retention

This paper reviews household property risk management and estimates normatively optimal choice under theoretical assumptions. Although risk retention limits are common in the financial planning industry, estimates of optimal risk retention that include both financial and human wealth far exceed limits commonly recommended. Households appear to frame property losses differently from other wealth losses leading to wealth-reducing, excess risk transfer. Possible theoretical explanations for excess sensitivity to loss are reviewed. Differences between observed and optimal risk management imply a large potential gain from improved choice.

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