Financial risk

About: Financial risk is a research topic. Over the lifetime, 11899 publications have been published within this topic receiving 231404 citations. The topic is also known as: economic risk.

Automated Detection of Financial Events in News Text

Abstract: markdownToday’s financial markets are inextricably linked with financial events like acquisitions, profit announcements, or product launches. Information extracted from news messages that report on such events could hence be beneficial for financial decision making. The ubiquity of news, however, makes manual analysis impossible, and due to the unstructured nature of text, the (semi-)automatic extraction and application of financial events remains a non-trivial task. Therefore, the studies composing this dissertation investigate 1) how to accurately identify financial events in news text, and 2) how to effectively use such extracted events in financial applications. Based on a detailed evaluation of current event extraction systems, this thesis presents a competitive, knowledge-driven, semi-automatic system for financial event extraction from text. A novel pattern language, which makes clever use of the system’s underlying knowledge base, allows for the definition of simple, yet expressive event extraction rules that can be applied to natural language texts. The system’s knowledge-driven internals remain synchronized with the latest market developments through the accompanying event-triggered update language for knowledge bases, enabling the definition of update rules. Additional research covered by this dissertation investigates the practical applicability of extracted events. In automated stock trading experiments, the best performing trading rules do not only make use of traditional numerical signals, but also employ news-based event signals. Moreover, when cleaning stock data from disruptions caused by financial events, financial risk analyses yield more accurate results. These results suggest that events detected in news can be used advantageously as supplementary parameters in financial applications.

Mergers Increase Default Risk

Abstract: We examine the impact of mergers on default risk. Despite the potential for asset diversification, we find that, on average, a merger increases the default risk of the acquiring firm. This result cannot solely be explained by the tendency for generally safe acquirers to purchase riskier targets or by the tendency of acquiring firms to increase leverage post-merger. Our evidence suggests that manager-related issues may play an important role. In particular, we find larger merger-related increases in risk at firms where CEOs have large option-based compensation, where recent stock performance is poor, and where idiosyncratic equity volatility is high. These results suggest that the increased default risk may arise from aggressive managerial actions affecting risk enough to outweigh the strong risk-reducing asset diversification expected from a typical merger.

Risk Assessment with Asymmetric Information

Abstract: The risk analysis of small business propositions is characterized by uncertainty and asymmetric information, producing problems of moral hazard and adverse selection for the banks and liquidity constraints for entrepreneurs. Decision making is based on information supplied and the application of different criteria. Concerns the relative importance of different criteria and whether the right criteria are being used to assess small firm ventures by banking institutions, and reports the results of research carried out into the importance of different criteria used in risk assessment by bank officers. Finds a high degree of variability in the approach by different bank officers and a bias towards financial information. The findings have marketing implications. Risk assessment cannot be divorced from the nature of the relationship with the small business customer. Investment in improving techniques of risk assessment increases profitability for the bank and improves marketing opportunities through the developm...

Principles of financial engineering

Abstract: Three new chapters, numerous additions to existing chapters, and an expanded collection of questions and exercises make this third edition of Principles of Financial Engineering essential reading. Between defining swaps on its first page and presenting a case study on its last, Robert Kosowski and Salih Neftci's introduction to financial engineering shows readers how to create financial assets in static and dynamic environments. Poised among intuition, actual events, and financial mathematics, this book can be used to solve problems in risk management, taxation, regulation, and above all, pricing. * The Third Edition presents three new chapters on financial engineering in commodity markets, financial engineering applications in hedge fund strategies, correlation swaps, structural models of default, capital structure arbitrage, contingent convertibles and how to incorporate counterparty risk into derivatives pricing, among other topics. * Additions, clarifications, and illustrations throughout the volume show these instruments at work instead of explaining how they should act * The solutions manual enhances the text by presenting additional cases and solutions to exercises

Type a and risk taking in everyday money matters

Abstract: The purpose of the present study is to extend previous research investigating personality factors as determinants of financial risk taking in everyday money matters (e.g., personal investments and household affairs). Type A and Type B subjects were asked to make a series of everyday financial decisions that varied in degree of risk. Type A individuals took greater financial risks than Type B individuals. The results provide additional support for the influence of personality factors in everyday financial risk-taking behavior and demonstrated another area of risk taking associated with the Type A behavior pattern not previously identified.