This paper proposes a framework for audited financial reporting that is intended to address major perceived limitations in current quality reporting principles. The paper thus addresses the potential decoupling problem between financial statement audits and what is being audited identified by Power (1997). Using an extended risk model, the framework not only identifies principles of quality fin...

Using ratings of corporate governance developed by RiskMetrics Group (RMG), formerly Institutional Shareholder Services, we investigate whether relatively poor governance is associated with financial restatement, and whether restatement results in improved governance. We identify 150 firms that restated their 2003 financial statements to correct material error, and we use Compustat to generate ...

background: in 2012, switzerland changed from retrospective to prospective hospital payment based on diagnosis related groups (drgs), following the example of the united states, australia, and germany. as in these countries, the objective of this transition was to motivate hospitals to improve efficiency by making them bear financial risk to some extent.objective: this contribution seeks to fin...

In this paper we investigate the number and maximum severity of the ruin excursion of the insurance portfolio reserve process in the Cramér–Lundberg model with and without tax payments. We also provide a relation of the Cramér–Lundberg risk model with the G/G/∞ queue and use it to derive some explicit ruin probability formulae. Finally, the renewal risk model with tax is considered, and an asym...

We propose a structural credit risk model for consumer lending using option theory and the concept of the value of the consumer’s reputation. Using Brazilian empirical data and a credit bureau score as proxy for creditworthiness we compare a number of alternative models before suggesting one that leads to a simple analytical solution for the probability of default. We apply the proposed model t...

We provide an introduction and overview to operational risk modeling according to the Basel II legal documents and summarize observed practices and issues as well as suggested approaches for measuring and quantifying operational risk.

Predictability of Asset Returns and the Efficient Market Hypothesis This paper is concerned with empirical and theoretical basis of the Efficient Market Hypothesis (EMH). The paper begins with an overview of the statistical properties of asset returns at different frequencies (daily, weekly and monthly), and considers the evidence on return predictability, risk aversion and market efficiency. T...

In this paper, under the assumption that the claimsize is Negatively dependent subexponentially distributed and the constant interest force is considered, a simple asymptotics of ruin probability for renewal risk model within finite horizon is obtained. The results obtained extended the corresponding results of related papers.

The volatility surface implied by option prices presents a structure that changes over time. The aim of this study is to present a framework to model the implied volatility of the FTSE options in real time, and to present a prototype application that implements this framework. We adapt the parametric models presented in Dumas et al (1998) to estimate the surfaces across moneyness instead of acr...

We consider a financial model where the prices of risky assets are quoted by a representative market maker who takes into account an exogenous demand. We characterize these prices in terms of a system of BSDEs with quadratic growth. We show that this system admits a unique solution for every bounded demand if and only if the market maker’s risk-aversion is sufficiently small. The uniqueness is ...