A number of models have been proposed for the equity return process for equity-linked guarantees, following the introduction of stochastic modeling requirements by the Canadian Institute of Actuaries and the American Academy of Actuaries. In this paper we present some of the models that have become well known and discuss the use of residuals to test the fit. After showing that the use of the st...

This paper investigates the role of banking supervision in controlling bank risk. Banking supervision is measured in terms of enforcement outputs (i.e., on-site audits and sanctions). Our results show an inverted U-shaped relationship between on-site audits and bank risk, while the relationship between sanctions and risk appears to be linear and negative. We also consider the combined effect of...

We examine the ability of male immigrants to transfer their occupational human capital using information from the O*NET and a unique dataset that includes both the last source country occupation and the first four years of occupations in Canada. We first augment a model of occupational choice and skill accumulation to derive predictions about the cross-border transferability of occupational hum...

We assess farmers' incentives and the conditioning factors for adoption of agricultural technologies under climate risk and evaluate its impact on food security in Niger. Results show that while the use of modern inputs and organic fertilizers improves productivity, results are unclear for crop residues. Results also show that factors driving modern input use are different than those of crop re...

We analyze the transmission effects of monetary policy in a general equilibrium model of the financial sector, with bank lending and securities markets. Bank lending is constrained by capital adequacy requirements, and asymmetric information adds a cost to outside bank equity capital. In our model, monetary policy does not affect bank lending through changes in bank liquidity; rather, it operat...

The Sato process model for option prices is expanded to accomodate credit considerations by incorporating a single jump to default occuring at an independent random time with a Weibull distribution. Explicit formulas, in this context, for the bid and ask prices of two price economies that price residual risks to levels of risk acceptability are then derived. Liquidity considerations are thereby...

Resampling implementation of a stress-scenario approach to estimating portfolio default loss distributions is proposed as the basis for estimates of the appropriate absolute level of economic capital allocations for portfolio credit risk. Estimates are presented for stress scenarios of varying severity and implications of different time horizons are analyzed. Results for a numeraire portfolio a...

The Basel Accords represent landmark financial agreements for the regulation of commercial banks. The main purpose of the accords was to strengthen the soundness and stability of the international banking system by providing a minimum standard for capital requirements. In 2004, the Basel Committee proposed new guidelines, which have become known as Basel II. We give a short overview of the Base...

Many insurance and reinsurance contracts are contingent on events such as hurricanes, terrorist attacks or political upheavals whose probabilities are not known with precision. There is a body of experimental evidence showing that higher premiums are charged for these “ambiguous” contracts, which may in turn inhibit (re)insurance transactions, but little research analysing explicitly how and wh...

A dramatic and virtually unprecedented shift in the portfolio structure of U.S. commercial banks has taken place since 1989. Specifically, government securities as a share of total loans has risen from 15 percent in 1989 to more than 22 percent today. This portfolio shift has coincided with an important change in the financial regulatory structure. Bank regulators around the world agreed to a c...