This paper starts with description of the widely used risk assessment tool Failure Modes & Effects Analysis. The paper then later examines some of the alternative methods for risk assessment and their advantages. In this work, we also point out the advantages of using Six Sigma in Risk Assessment and propose a novel technique which would overcome the restrictions of existing Risk Management tools.

Managerial Hedging and Equity Ownership Risk-averse managers can hedge the aggregate component of their exposure to firm’s cash flow risk by trading in financial markets, but cannot hedge their firm-specific exposure. This gives them incentives to pass up firm-specific projects in favor of standard projects that contain greater aggregate risk. Such risk substitution gives rise to excessive aggr...

We show that the dividend growth rate implied by the futures market is informative about (i) the expected dividend growth rate and (ii) the expected dividend risk premium. We model the dividend risk premium and explore its implications for the predictability of dividend growth and aggregate stock returns. We show that accounting for the dividend risk premium strengthens the predictability of di...

This paper investigates market perceptions of the risk of large exchange rate movements by using information gleaned from risk reversal contracts and macroeconomic news surprises. We focus on the height of the carry trade period in Japan (March 2004 through December 2006). Concerns about sharp yen appreciation were particularly evident during the period of heavy carry trade activity and are mor...

We consider certificate revocation from three high-level perspectives: temporal nonmonotonicity, user interfaces, and risk management. We argue that flawed understanding of these three aspects of revocation schemes has caused these schemes to be unnecessarily costly, complex, and confusing. We also comment briefly on some previous works, including those of Rivest [16], Fox and LaMacchia [5], an...

Despite significant advances in risk management, routing hazardous materials (hazmat) has relied on relatively simpler methods. In this paper, we formally introduce an advanced risk measure, called conditional valueat-risk (CVaR), applied to truck routing problems for hazmat transportation. We find that CVaR offers a flexible, risk-averse, and computationally tractable routing method that is ad...

The paper analyzes risk assessment for cash flows in continuous time using the notion of convex risk measures for processes. By combining a decomposition result for optional measures, and a dual representation of a convex risk measure for bounded càdlàg processes, we show that this framework provides a systematic approach to the both issues of model ambiguity, and uncertainty about the time val...

We find that augmenting a regression of excess bond returns on the term structure of forward rates with a rolling estimate of the mean realized jump size—identified from high-frequency bond returns using the bi-power variation technique—substantially increases the R2 of the regression. This result is consistent with the setting of an unspanned risk factor in which the conditional distribution o...

The paper assesses the usefulness of selective hedging strategies when combined with forecast techniques in the live hog contract. The use of routine futures and options hedging is not attractive relative to a cash-only strategy. However, forecasting and hedging can contribute to price risk management improvement for risk-averse producers. Consistent with previous research, the results indicate...

The class of all law invariant, convex risk measures for portfolio vectors is characterized. The building blocks of this class are shown to be formed by the maximal correlation risk measures. We introduce some classes of multivariate distortion risk measures and relate them to multivariate quantile functionals and to an extension of the average value at risk measure.