Benchmark Index of Risk Appetite

Glycaemic index, appetite and body weight.

Much interest has been focused on the relationship between glycaemic index and body-weight loss, some of which is fueled by popular media. However, there is a number of potential mechanisms that could be triggered by reducing the glycaemic index of the carbohydrate consumed in the diet. For example, the effect of foods on the gastrointestinal tract and the effect on blood glucose both could lea...

The Risk Appetite of Private Equity Sponsors

Using a unique proprietary data set of 460 realized buyouts completed between 1990 and 2005, we examine the risk appetite of private equity (PE) sponsors in different states of the PE market and analyse key determinants of deal-level equity risk. We develop a new approach to mathematically model PE investment equity risk based on the Black-Cox default model. We find higher equity volatilities d...

Does Option Compensation Increase Managerial Risk Appetite?

This paper solves the dynamic investment problem of a risk averse manager compensated with a call option on the assets he controls. Under the manager’s optimal policy, the option ends up either deep in or deep out of the money. As the asset value goes to zero, volatility goes to infinity. However, the option compensation does not strictly lead to greater risk seeking. Sometimes, the manager’s o...

A Benchmark Framework for Integrated Risk Management

A Benchmark Framework for Risk Management

The paper describes a general framework for contingent claim valuation for finance, insurance and general risk management. It considers security prices and portfolios with finite expected returns, where the growth optimal portfolio is taken as numeraire or benchmark. Benchmarked nonnegative wealth processes are shown to be supermartingales. Fair benchmarked values are conditional expectations o...