Is Bank CEO Pay Sensitive to Operational Risk Event Announcements?
This study reveals how operational risk events affect US bank CEO compensation from 1992-2016. Results indicate that compensation committees take operational risk into account & that recent regulations have enhanced this process. Additionally, operational risk events have a detrimental effect on options-based compensation. Lire
Analysis of New Models of Emerging Risk for Insurance Companies: The Climate Risk
“We aim to analyze strategies for assessing and managing new risks that affect the insurance industry, considering the regulatory requirements that the company must follow. To this end, the open-source software Climada was examined. This software uses stochastic forecasting models such as ARCH, GARCH, and ARIMA. Through real data obtained during an internship at E&Y, […]
Bayesian Model Selection and Prior Calibration for Structural Models in Economic Experiments: Some Guidance for the Practitioner
“Bayesian estimates from experimental data can be influenced by highly diffuse or “uninformative” priors. This paper discusses how practitioners can use their own expertise to critique and select a prior that (i) incorporates our knowledge as experts in the field, and (ii) achieves favorable sampling properties. I demonstrate these techniques using data from eleven experiments […]
Aggregating heavy-tailed random vectors: from finite sums to Lévy processes
“… we study the behavior of the asymptotic tail distribution of independent sums of heavy-tailed random vectors under the paradigm of multivariate regular variation. Assessment of such tail probabilities are of interest in risk management for many finance, insurance, queueing, and environmental applications. Multidimensional tail events are often characterized by at least one variable exceeding […]
Risk Management and the Board of Directors
“… new risks—and the intensification of longstanding risks—are pressure-testing the agility and resilience of corporate strategies, risk management systems and practices.” Lire
Building up Cyber Resilience by Better Grasping Cyber Risk Via a New Algorithm for Modelling Heavy-Tailed Data
“We propose here an analysis of the database of the cyber complaints filed at the Gendarmerie Nationale.We perform this analysis with a new algorithm developed for non-negative asymmetric heavy-tailed data, which could become a handy tool in applied fields. This method gives a good estimation of the full distribution including the tail. Our study confirms […]
Bank Stress Testing, Human Capital Investment and Risk Management
“While stress testing has modernized banks’ internal risk management by spurring the acquisition of highly skilled risk management talent, recent changes to the tests could erode its efficacy.” Lire
Financing Constraints and Risk Management: Evidence From Micro-Level Insurance Data
“Using data on credit scores matched with unique information on firm level commercial insurance purchases, we find that financing constraints lead to higher insurance spending. We adopt a regression discontinuity design and show that financially constrained firms spend 5–14% more on insurance than otherwise similar unconstrained firms. “ Lire
Machine Learning for Categorization of Operational Risk Events Using Textual Description
“… an overview of how machine learning can help in categorizing textual descriptions of operational loss events into Basel II event types. We apply PYTHON implementations of support vector machine and multinomial naive Bayes algorithms to precategorized Öffentliche Schadenfälle OpRisk (ÖffSchOR) data to demonstrate that operational loss events can be automatically assigned to one of […]
The Information Value of Past Losses in Operational Risk
“… the information provided by past losses results from them capturing hard to quantify factors such as the quality of operational risk controls, the risk culture, and the risk appetite of the bank.” Lire
Risk, Uncertainty, and the Future of Corporate Human Rights Due Diligence
“The EU, France, and Germany, among other jurisdictions, have recently adopted laws requiring large businesses to conduct human rights due diligence (HRDD) in their supply chains.” Lire
Strategic Data Access Management
“An employee may be attacked by a potentially sophisticated adversary whose goal is to steal all their data. Therefore, the firm trades off the efficiency benefit of the more permissive data access architecture with the adversarial risk it incurs. We characterize the firm’s optimal data access architecture and investigate how it depends both on the adversarial environment […]
Climate Risks in the U.S. Banking Sector: Evidence from Operational Losses and Extreme Storms
“… our findings provide new evidence regarding U.S. banking organizations’ exposure to climate risks with implications for risk management practices and supervisory policy.” Lire
A Time Series Approach to Explainability for Neural Nets with Applications to Risk-Management and Fraud Detection
“We here propose a novel XAI [eXplainable AI] technique for deep learning methods (DL) which preserves and exploits the natural time ordering of the data. Simple applications to financial data illustrate the potential of the new approach in the context of risk-management and fraud-detection.” Lire
Estimation of Systemic Shortfall Risk Measure using Stochastic Algorithms
” In this paper, we use stochastic algorithms schemes in estimating MSRM [market data based systemic risk measure] and prove that the resulting estimators are consistent and asymptotically normal. We also test numerically the performance of these algorithms on several examples.” Lire
Cyber Risk: Hyperconnectivity and the Political Economy of Uncertainty
“This paper explores the notion of ‘cyber risk’, asking how we might understand it through a sociotechnical lens. It pays specific attention to how we can theorise cyber risk as an assemblage of sociotechnical ‘riskscapes’, in which our understanding of risk goes beyond organisational imperatives of ‘risk management’ and into treating cyber risk as a set of productive knowledges and practices within a […]
On Optimal Insurance And Anomaly-Detection In Title Insurance Coverage.
“… this article introduces decision models and shows that the optimal title insurance evolves as market and property-specific conditions change. “ Lire
HGV4Risk: Hierarchical Global View-guided Sequence Representation Learning for Risk Prediction
“Despite that some attention or self-attention based models with time-aware or feature-aware enhanced strategies have achieved better performance compared with other temporal modeling methods, such improvement is limited due to a lack of guidance from global view. To address this issue, we propose a novel end-to-end Hierarchical Global View-guided (HGV) sequence representation learning framework. “ Lire
The Government Behind Insurance Governance: Lessons for Ransomware
“This paper analyzes how governments support insurance markets to maintain insurability and limit risks to society. We propose a new conceptual framework grouping government interventions into three dimensions: regulation of risky activity, public investment in risk reduction, and co-insurance.” Lire
Conditional divergence risk measures
“Our paper contributes to the theory of conditional risk measures and conditional certainty equivalents. We adopt a random modular approach which proved to be effective in the study of modular convex analysis and conditional risk measures.” Lire