Risk Auctions: Novel Mechanisms for Eliciting Risk Aversion Coefficients and the Impact of Probability vs. Money Framing

2009 ◽  
Author(s):  
Christopher Y. Olivola ◽  
Stephanie W. Wang
Keyword(s):  
Risk Aversion ◽  
The Impact

scholarly journals Spillover Effect of Global Financial Cycle To Asset Markets in Asean-5 Countries: A Structural VAR Approach

2018 ◽  
Vol 2 (02) ◽  
pp. 1
Author(s):  
Sri Andaiyani ◽  
Telisa Aulia Falianty
Keyword(s):  
Risk Aversion ◽  
Capital Flows ◽  
Asset Prices ◽  
Emerging Market ◽  
Structural Var ◽  
Asset Markets ◽  
Equity Prices ◽  
Financial Cycle ◽  
Property Prices ◽  
The Impact

<p><em>An upsurge and volatility of capital flows to Emerging Asian Economies indicated that there is the potential effect of global financial cycle to emerging market. It provides an overview of investor risk aversion in short term investment after financial crisis 2008. Global financial cycle could have a significant impact to asset prices, including equity prices and property prices. Rey (2015) has triggered an interesting discussion about global financial cycle. She found that there was a global financial cycle in capital flows, asset prices and credit growth. This cycle was co</em><em>‐</em><em>moves with the VIX, a measure of uncertainty and risk aversion of the markets. Therefore, this study attempts to analyze empirically global financial cycle shocks, measured by the VIX, on equity prices and property prices in ASEAN-5, namely Indonesia, Malaysia, Singapore, Thailand and Philippines. We estimate quarterly frequency data from Q1 1990 to Q2 2016 with Structural Vector Autoregressive (SVAR) approach. The result of this study showed that global financial cycle has a negative significant impact on the ASEAN-5 asset markets, in spite of the response of shock differs by country and size. This result is consistent with ASEAN-5 as small open economies that remain vulnerable to the global factor. This study contributes to the literature in several ways. First, we identify not only cyclical expansions or contraction in asset markets but also the impact of global financial cycle to asset markets in ASEAN-5 countries. Second, we investigate whether there are heterogeneous responses of ASEAN-5 countries to global financial cycle shocks. Third, we also identify the pattern of cycle in ASEAN-5 countries</em>.</p><p><strong><em>J</em></strong><strong><em>EL Classification: </em></strong>F30, F37, F42</p><strong><em>Keywords: </em></strong><em>ASEAN, Asset Markets, Global Financial Cycle, SVAR</em>

scholarly journals Large-scale application of the flood damage model RAilway Infrastructure Loss (RAIL)

2016 ◽  
Vol 16 (11) ◽  
pp. 2357-2371 ◽  
Author(s):  
Patric Kellermann ◽  
Christine Schönberger ◽  
Annegret H. Thieken
Keyword(s):  
Risk Management ◽  
Risk Aversion ◽  
Flood Risk ◽  
Structural Damage ◽  
Large Scale ◽  
Damage Model ◽  
Flood Damage ◽  
Railway Infrastructure ◽  
Increased Risk ◽  
The Impact

Abstract. Experience has shown that river floods can significantly hamper the reliability of railway networks and cause extensive structural damage and disruption. As a result, the national railway operator in Austria had to cope with financial losses of more than EUR 100 million due to flooding in recent years. Comprehensive information on potential flood risk hot spots as well as on expected flood damage in Austria is therefore needed for strategic flood risk management. In view of this, the flood damage model RAIL (RAilway Infrastructure Loss) was applied to estimate (1) the expected structural flood damage and (2) the resulting repair costs of railway infrastructure due to a 30-, 100- and 300-year flood in the Austrian Mur River catchment. The results were then used to calculate the expected annual damage of the railway subnetwork and subsequently analysed in terms of their sensitivity to key model assumptions. Additionally, the impact of risk aversion on the estimates was investigated, and the overall results were briefly discussed against the background of climate change and possibly resulting changes in flood risk. The findings indicate that the RAIL model is capable of supporting decision-making in risk management by providing comprehensive risk information on the catchment level. It is furthermore demonstrated that an increased risk aversion of the railway operator has a marked influence on flood damage estimates for the study area and, hence, should be considered with regard to the development of risk management strategies.

Risk Aversion and Unemployment in an Open Economy

2000 ◽  
Vol 49 (2) ◽  
Author(s):  
Pia Weiß
Keyword(s):  
Risk Aversion ◽  
Open Economy ◽  
Small Open Economy ◽  
Risk Behaviour ◽  
Terms Of Trade ◽  
Individual Risk ◽  
Risk Averse ◽  
Search Frictions ◽  
Long Run ◽  
The Impact

AbstractThe paper analyses the impact which risk aversion has on a small open economy characterised by search frictions on the labour market. It is shown that the long-run qualitative effects caused by a terms-of-trade shock are independent of individual risk behaviour. As far as quantitative aspects are concerned risk aversion always leads to higher equilibrium employment; however the increase in unemployment due to a price shock is the higher the more risk-averse individuals are.

ASSET CORRELATIONS IN TURBULENT MARKETS AND THE IMPACT OF DIFFERENT REGIMES ON ASSET MANAGEMENT

2011 ◽  
Vol 28 (01) ◽  
pp. 1-23 ◽  
Author(s):  
GERMAN BERNHART ◽  
STEPHAN HÖCHT ◽  
MICHAEL NEUGEBAUER ◽  
MICHAEL NEUMANN ◽  
RUDI ZAGST
Keyword(s):  
Risk Aversion ◽  
Asset Management ◽  
Value At Risk ◽  
Conditional Value At Risk ◽  
Dependence Structure ◽  
The Us ◽  
The Mean ◽  
Asian Market ◽  
Asset Classes ◽  
The Impact

In this article, the dependence structure of the asset classes stocks, government bonds, and corporate bonds in different market environments and its implications on asset management are investigated for the US, European, and Asian market. Asset returns are modelled by a Markov-switching model which allows for two market regimes with completely different risk-return structures. Using major stock indices from all three regions, calm and turbulent market periods are identified for the time period between 1987 and 2009 and the correlation structures in the respective periods are compared. It turns out that the correlations between as well as within the asset classes under investigation are far from being stable and vary significantly between calm and turbulent market periods as well as in time. It also turns out that the US and European markets are much more integrated than the Asian and US/European ones. Moreover, the Asian market features more and longer turbulence phases. Finally, the impact of these findings is examined in a portfolio optimization context. To accomplish this, a case study using the mean-variance and the mean-conditional-value-at-risk framework as well as two levels of risk aversion is conducted. The results show that an explicit consideration of different market conditions in the modelling framework yields better portfolio performance as well as lower portfolio risk compared to standard approaches. These findings hold true for all investigated optimization frameworks and risk-aversion levels.

Coordinating Supply Chain with Buy-Back Contracts in the Presence of Risk Aversion

2018 ◽  
Vol 35 (02) ◽  
pp. 1840008 ◽  
Author(s):  
Chunlin Luo ◽  
Xin Tian ◽  
Xiaobing Mao ◽  
Qiang Cai
Keyword(s):  
Supply Chain ◽  
Risk Aversion ◽  
Value At Risk ◽  
Performance Measure ◽  
Expected Profit ◽  
Conditional Value At Risk ◽  
Allocation Rule ◽  
Risk Averse ◽  
Buy Back ◽  
The Impact

This paper addresses the operational decisions and coordination of the supply chain in the presence of risk aversion, where the risk averse retailer’s performance is measured by a combination of the expected profit and conditional value-at-risk (CVaR). Such performance measure reflects the desire of the retailer to maximize the expected profit on one hand and to control the downside risk of the profit on the other hand. The impact of risk aversion on the supply chain’s decision and performance is also explored. To overcome the inefficiency due to the double marginalization and the aggravation resulting from risk aversion, we investigate the buy-back contract to coordinate the supply chain. Such contract can largely increase the supply chain’s profit, especially when the retailer is more risk averse. Lastly, we extend such risk measure to the widely-used business model nowadays — platform selling model, and explore the impact of the allocation rule on the manufacturer’s decision.

scholarly journals Evaluating Alternative Designs of a Multilevel HIV Intervention in Maharashtra, India: The Impact of Stakeholder Constraints

2018 ◽  
Vol 3 (2) ◽  
pp. 238146831880394
Author(s):  
Anik R. Patel ◽  
Kelly V. Ruggles ◽  
Kimberly Nucifora ◽  
Qinlian Zhou ◽  
Stephen Schensul ◽  
...  
Keyword(s):  
Risk Aversion ◽  
Group Counseling ◽  
Annual Cost ◽  
Text Message ◽  
Individual Counseling ◽  
Hiv Intervention ◽  
Sex Risk ◽  
Adherence Support ◽  
Alcohol Counseling ◽  
The Impact

Background. Multilevel interventions combine individual component interventions, and their design can be informed by decision analysis. Our objective was to identify the optimal combination of interventions for alcohol-using HIV+ individuals on antiretroviral drug therapy in Maharashtra, India, explicitly considering stakeholder constraints. Methods. Using an HIV simulation, we evaluated the expected net monetary benefit (ENMB), the probability of lying on the efficiency frontier (PEF), and annual program costs of 5,836 unique combinations of 15 single-focused HIV risk-reduction interventions. We evaluated scenarios of 1) no constraints (i.e., maximize expected value), 2) short-term budget constraints (limits on annual programmatic costs of US$200,000 and $400,000), and 3) a constraint stemming from risk aversion (requiring that the strategy has >50% PEF). Results. With no constraints, the combination including long individual alcohol counseling, text-message adherence support, long group counseling for sex-risk, and long individual counseling for sex-risk (annual cost = $428,886; PEF ∼27%) maximized ENMB and would be the optimal design. With a cost constraint of $400,000, the combination including long individual alcohol counseling, text-message adherence support, brief group counseling for sex-risk, and long individual counseling for sex-risk (annual cost = $374,745; PEF ∼4%) maximized ENMB. With a cost constraint of $200,000, the combination including long individual alcohol counseling, text-message adherence support, and brief group counseling for sex-risk (annual cost = $187,335; PEF ∼54%) maximized ENMB. With the risk aversion constraint, the same configuration ( long individual alcohol counseling, text-message support, and brief group counseling for sex-risk) maximized health benefit. Conclusion. Evaluating the costs, risks, and projected benefits of alternatives supports informed decision making prior to initiating study; however, stakeholder constraints should be explicitly included and discussed when using decision analyses to guide study design.

Using a Crop Simulation Model to Understand the Impact of Risk Aversion on Optimal Irrigation Management

2017 ◽  
Vol 60 (6) ◽  
pp. 2111-2122 ◽  
Author(s):  
Rulianda P. Wibowo ◽  
Nathan P. Hendricks ◽  
Isaya Kisekka ◽  
Alemie Araya
Keyword(s):  
Risk Aversion ◽  
Water Use ◽  
Irrigation Management ◽  
Water Holding Capacity ◽  
Modeling Framework ◽  
Irrigated Area ◽  
Irrigation Depth ◽  
The Impact ◽  
Water Holding ◽  
Seasonal Irrigation

Abstract. We studied optimal irrigation management by risk-averse farmers with different soil types under limited well capacity. Our modeling framework allowed us to assess the optimal adjustment along the intensive margins (i.e., changes in seasonal irrigation depth) and along the extensive margins (i.e., changes in irrigated area). Our empirical application uses AquaCrop to simulate corn yields with historical weather in southwest Kansas under a large number of potential irrigation strategies. We show that risk aversion significantly increases total water use, especially for low and medium well capacities. While farmers decreased irrigated area due to risk aversion, the increase in water use occurred because it was optimal to increase the seasonal irrigation depth to reduce production risk. The increase in seasonal irrigation depth arises mostly from reduced management allowable depletion (MAD) levels in the initial crop growth stages of corn. Counterintuitively, risk aversion had a smaller impact on water use for a soil with a smaller soil water holding capacity. This result arises because optimal irrigation under risk neutrality is larger for soils with a smaller water holding capacity. Our results highlight the importance of accounting for risk aversion when estimating the optimal irrigation management strategy and show that the impact of risk aversion differs significantly by well capacity and soil type. Keywords: AquaCrop, Irrigation, Risk, Well capacity.

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