Study finds risk management significantly improves pension scheme efficiency in Kenya.
problem Improving efficiency of pension schemes in Kenya.
method Panel data analysis of 128 pension schemes from 2015-2021.
result Risk management significantly mediates the relationship between corporate governance and pension scheme efficiency.
GAICF proposes a framework for managing generative AI risks in banking.
problem Generative AI's impact on financial decision-making and governance.
method SR 26-2-compatible governance framework for generative AI.
result GAICF aligns generative AI practices with SR 26-2 supervisory expectations.
GAICF proposes a framework for governing generative AI in banking.
problem Generative AI's impact on financial decision-making and governance.
method SR 26-2-compatible governance framework for generative AI applications.
result GAICF aligns generative AI practices with SR 26-2 supervisory expectations.
New AI governance framework tackles risks in finance.
problem Risks from evolving AI models in finance.
method Agent-based framework with modular governance architecture.
result Controls quarantine harmful behavior in real time.
This paper tackles AI model governance challenges in financial services.
problem Challenges in current AI model governance practices in financial services.
method Proposes a system-level framework for increased self-regulation.
result Enhanced model governance and risk management capabilities.
This paper introduces modal epistemic tools for risk management.
problem Identifying and certifying risk claims when institutions lack the necessary epistemic stance.
method Develops crisp and fuzzy modal semantics for assurance and working commitment, distinguishing between object-level risk claims and meta-level epistemic diagnostics.
result Risk governance should model evidential incompleteness and failures of escalation, not just hazards and losses.
Study improves pension scheme efficiency in Kenya through governance and risk management.
problem Limited research on efficiency of Kenyan pension schemes under governance structures.
method Quantitative panel regression analysis on 128 Kenyan pension schemes over 7 years.
result Employee board members have a significant positive effect on pension scheme efficiency.
We use principle component analysis (PCA) of cross correlations in European government bonds and European stocks to investigate the systemic risk contained in the European economy. We tackle the task to visualize the evolution of risk, introducing the conditional average rolling sum (CARS). Using this tool we see that …
Paper proposes government indemnification for AI risks to solve judgment-proof problem.
problem Uninsurable risks from AI, especially existential risks, create a judgment-proof problem.
method A government-provided, mandatory indemnification program using risk-priced fees and Bayesian Truth Serum.
result The approach better leverages private information and signals risk mitigation efforts.
We derive simple return models for several classes of bond portfolios. With only one or two risk factors our models are able to explain most of the return variations in portfolios of fixed rate government bonds, inflation linked government bonds and investment grade corporate bonds. The underlying risk factors have nat…
We consider the problem of governing systemic risk in a banking system model. The banking system model consists in an initial value problem for a system of stochastic differential equations whose dependent variables are the log-monetary reserves of the banks as functions of time. The banking system model considered gen…
This paper measures the intensity of implicit government guarantees using PMC index model.
problem Excessive local government debt due to implicit government guarantees.
method Text mining of policy documents related to municipal investment bonds, PMC index model.
result Recent policies have reduced the intensity of implicit government guarantees.
The paper assesses how equity tail risk impacts US Treasury bond returns.
problem The effects of equity tail risk on the US government bond market.
method Estimating equity tail risk using option-implied stock market volatility and assessing its predictive power in reduced-form regressions and a term structure model.
result Equity tail risk significantly predicts one-month excess returns on Treasuries.
We consider the problem of governing systemic risk in an assets-liabilities dynamical model of banking system. In the model considered each bank is represented by its assets and its liabilities.The capital reserves of a bank are the difference between assets and liabilities of the bank. A bank is solvent when its capit…
Proposes a framework to explain KS deterioration in credit risk models.
problem Inconsistent and ad hoc diagnosis of KS decline in credit risk models.
method Counterfactual diagnostic framework attributing KS decline to sampling variability, portfolio composition, covariate shift, and residual deterioration.
result The proposed approach provides more interpretable and governance-relevant explanations than threshold-based review alone.
Study proposes a tax-based system to share disaster risk among regions.
problem Systemic risk in catastrophic events and insurer insolvency.
method Public-private partnership with government intervention through taxation.
result Taxation system effectively shares residual claims in case of insurer insolvency.
Optimization methods are used to determine equilibria of investment in cryptocurrencies. The basic assumptions involve existence of a core group (the "wealthy") that fears the loss of substantial assets through government seizure. Speculators constitute another group that tends to introduce volatility and risk for the …
This paper explores how decentralized finance mitigates traditional finance's shortcomings.
problem Lack of transparency and moral hazard in centralized finance.
method Analysis of smart contracts and decentralized governance in DeFi.
result DeFi mitigates traditional finance's shortcomings through decentralized governance and smart contracts.
Derives metrics for DeFi vaults, addressing credit risk.
problem Credit risk in DeFi lending vaults.
method Three-level decomposition of vault risk; six structural features identified.
result Estimation architecture for credit risk metrics.
Study examines market risks on pension system sustainability.
problem Impact of market risks on pension corpus sustainability.
method Monte Carlo simulations with historical data.
result Market risks significantly impact pension corpus sustainability.
This paper improves credit risk analysis by incorporating state-dependent recovery rates into a factor model.
problem Accurate default forecasting in credit risk analysis.
method Extends a one-factor Gaussian copula model to include state-dependent recovery rates and a common factor.
result The proposed model outperforms other models in default prediction, especially during hectic periods.
Study uses TV news to measure climate risks affecting clean energy firms.
problem Understanding how climate risks impact clean energy firms' financial stability.
method Developed climate risk measures from TV news coverage and analyzed their effects on clean energy firms' risks.
result Increased TV news coverage of climate risks correlates with higher systematic risk and lower idiosyncratic risk for clean energy firms.
New ESGM scores include a 'Missing' pillar to account for unpublished ESG data.
problem Unpublished ESG data affects the reliability of ESG scores.
method Formulated a new 'Missing' pillar and introduced ESGM scores.
result ESGM scores improve risk assessment and avoid exclusion of assets.
Optimal bailout policies identified for financial institutions using AI.
problem Managing systemic financial risk during crises.
method Modelled bailout decisions as a Markov Decision Process (MDP) with network dynamics.
result Identified optimal investment policies to limit financial crises effects.
New risk metric for AI systems reduces safety risks with minimal data.
problem Risk assessment in multi-agent AI systems.
method Free Energy Principle applied to risk metrics, introducing Cumulative Risk Exposure.
result Gatekeepers improve system safety in autonomous vehicle fleets.
Investment and consumption strategy for risk-averse agents with Epstein-Zin utility.
problem Optimal investment and consumption strategy for Epstein-Zin utility.
method Detailed introduction to Epstein-Zin utility, existence and uniqueness proof, verification argument.
result Existence and uniqueness of optimal solution for Epstein-Zin utility under certain parameter restrictions.
Dynamic tracking error framework shows similar performance but varying volatility across different constraints.
problem Differences in governance parameters between Total Portfolio Approach and Strategic Asset Allocation.
method Portfolio simulations using U.S. equity and bond data from 2000 to 2026, spanning 2004 to 2026.
result Realized tracking error volatility varies 12-fold across different constraints, with costs highest during crises.
RL-CVaR model improves insurance reserving under economic stress.
problem Managing insurance reserve setting under claim development uncertainty and macroeconomic stress.
method Reinforcement Learning (PPO) with CVaR constraints, trained under regime-aware curriculum.
result RL-CVaR policy reduces solvency violations and tail-risk compared to classical methods.
We study a risk sensitive control version of the lifetime ruin probability problem. We consider a sequence of investments problems in Black-Scholes market that includes a risky asset and a riskless asset. We present a differential game that governs the limit behavior. We solve it explicitly and use it in order to find …
Four geometries govern sequential and distribution-free inference.
problem Sequential and distribution-free inference challenges.
method Four distinct admissibility geometries.
result Four classes of admissible procedures are pairwise non-nested.
A new framework assesses financial and ESG risks for sustainable investing.
problem Measuring risk and reward in sustainable investing considering environmental, social, and governance factors.
method Proposes axiomatic definitions for ESG-coherent risk measures and reward-risk ratios based on bivariate random variables.
result Empirical analysis ranks stocks using the proposed measures.
Study shows social media impacts shareholder returns on ESG risks.
problem Investor sentiment and public opinion on ESG risks.
method Event study design using social media data.
result Statistically significant reduction in abnormal returns after ESG-risk events.
We introduce Invariant Risk Minimization (IRM), a learning paradigm to estimate invariant correlations across multiple training distributions. To achieve this goal, IRM learns a data representation such that the optimal classifier, on top of that data representation, matches for all training distributions. Through theo…
Integrates ESG factors into Bachelier's model for asset pricing.
problem Incorporating ESG factors into classical finance models.
method Defines ESG price process and integrates into Bachelier's model.
result Enables option pricing valuation with ESG factors.
Auto.gov uses RL to automate DeFi governance, improving security and profitability.
problem Manual DeFi governance is prone to human bias and financial risks.
method Auto.gov employs a deep Q-network reinforcement learning strategy for semi-automated parameter adjustments. result Auto.gov outperforms traditional governance methods by at least 14% in terms of protocol profitability. The paper analyzes frameworks for integrating sustainability into investment decisions.
problem Understanding how ESG factors influence investment choices.
method Examined and analyzed various theoretical frameworks including Behavioral Finance, Modern Portfolio, and Risk Management.
result Investors increasingly integrate ESG factors to optimize financial outcomes and societal goals.
We show that any objective risk measurement algorithm mandated by central banks for regulated financial entities will result in more risk being taken on by those financial entities than would otherwise be the case. Furthermore, the risks taken on by the regulated financial entities are far more systemically concentrate…
This paper discusses the financial risks faced by the UK Pension Protection Fund (PPF) and what, if anything, it can do about them. It draws lessons from the regulatory regimes under which other financial institutions, such as banks and insurance companies, operate and asks why pension funds are treated differently. It…
Online portfolio selection research has so far focused mainly on minimizing regret defined in terms of wealth growth. Practical financial decision making, however, is deeply concerned with both wealth and risk. We consider online learning of portfolios of stocks whose prices are governed by arbitrary (unknown) stationa…
Modeling government intervention's impact on company market technology growth.
problem Understanding how governments influence technology growth and innovation diffusion.
method Proposed a simple extension of TGID models, incorporating a government intervention parameter.
result High government intervention can destabilize market development, lowering technology levels.
Optimal risk sharing found for heterogeneous risk attitudes using distortion risk measures.
problem Risk sharing in economies with diverse risk attitudes.
method Modeling preferences with distortion risk measures, using comonotonic and counter-monotonic principles.
result Optimal risk sharing strategies identified based on risk attitudes, reducing the n-agent problem to a two-agent formulation. Unified framework for ESG-inclusive portfolio optimization and pricing.
problem Incorporating ESG ratings into dynamic asset pricing theory.
method Introducing ESG-valued return as a linear transformation of financial and ESG scores, preserving traditional risk aversion with an ESG affinity parameter.
result Developed a more complex portfolio optimization problem in a space governed by reward, risk, and ESG score.
In this paper, we address the aggregation of dependent stop loss reinsurance risks where the dependence among the ceding insurer(s) risks is governed by the Sarmanov distribution and each individual risk belongs to the class of Erlang mixtures. We investigate the effects of the ceding insurer(s) risk dependencies on th…
Neural network model improves longevity risk assessment.
problem Systematic mispricing of longevity risk in linear models.
method Hybrid-Lift framework combining Hierarchical LSTM networks and Mean-Bias Correction.
result Hybrid-Lift outperforms Li-Lee framework by 17.40% in Sweden and 12.57% in West Germany.
Botswana's agricultural credit scheme is unsustainable and needs reform.
problem The current scheme is unsustainable and based on flawed actuarial principles.
method Proposes a new subsidy and premium rate setting method considering non-drought years.
result A sustainable agricultural credit guarantee scheme is recommended.
Introduces an asymmetric model for measuring market risk.
problem Existing models are symmetric and do not account for asymmetric risk.
method Develops an asymmetric capital asset pricing model that considers position-dependent market risk.
result Long positions in Apple stock have lower volatility than the market, contrary to the standard model.
Study identifies key ESG variables for assessing financial risk.
problem Assessing financial risk from ESG data with many variables.
method Proposed framework for hierarchical ESG data, selecting relevant variables.
result Selected ESG variables are more relevant to financial risk than aggregated scores.
LLMs can help explain credit risk models but not autonomously.
problem Leveraging LLMs for post-hoc explainability in credit risk models.
method Comparison of LLM outputs with SHAP and coefficient-based attributions on three LMs.
result LLMs reliably preserve feature-importance rankings but poorly align with autonomous explanations.