Financial data on screen

Financial Risk

The Great Financial Crisis upended the complacency that financial risks were comprehensively well measured, well understood and risk assessment and management competently practiced. The Volatility Institute, predecessor of the VRI, and borne out of the crisis, has for a decade been at the forefront of developing new tools to measure and monitor new risks. However, new challenges for financial risk assessment and management continue to multiply: Courtesy of new data and technology, new financial products are emerging, the financial system, business models and policy responses to them are evolving, and with them, new risks are surfacing.

The Volatility and Risk Institute will continue the VI’s work to develop cutting-edge tools for financial risk assessment and will broaden its reach with research into the interaction of nonfinancial with financial risks. Research on the financial implications of climate-related, cyber and geopolitical risk already do or will appear in VLAB daily updates. Like the VI, the VRI will collaborate with students, faculty and practitioners to produce and share this research.

Our latest research on Financial Risk

  • Acharya, Viral and Lasse Pedersen, “Economics with Market Liquidity Risk,” forthcoming, Critical Financial Review.
  • Acharya, Viral, Tim Eisert, Christian Eufinger, and Christian Hirsch, “Whatever It Takes: The Real Effects of Unconventional Monetary Policy,” Review of Financial Studies, 2019, 32(9): 3366-3411.
  • Acharya, Viral, Tim Eisert, Christian Eufinger, and Christian Hirsch, “Real Effects of the Sovereign Debt Crises in Europe: Evidence from Syndicated Loans,” Review of Financial Studies, 2018, 31(8), 2855-2896. 
  • Acharya, Viral, Aaditya Iyer, and Rangarajan Sundaram. “Risk-Sharing and the Creation of Systemic Risk,” Working Paper, 2016.
  • Adler, Barry, "The Creditors’ Bargain Revisited," 166 U. Pa. L. Rev. 1853 (2018) 
  • Adler, Barry and George Triantis, "Debt Priority and Options in Bankruptcy: A Policy Intervention," 91 Am. Bankr. L.J. 563 (2017) 
  • Altman, Edward, and Małgorzata Iwanicz‐Drozdowska, Erkki K. Laitinen, and Arto Suvas, “Financial Distress Prediction in an International Context: A Review and Empirical Analysis of Altman’s Z-Score Model,” Journal of International Financial Management and Accounting, 2016. 
  • Altman, Edward and Egon Kalotay, “Is the Benign Credit Cycle Over?” Economics and Business Review, No. 3, 2016. 
  • Berner, Richard, “The Macroprudential Toolkit,” in Hartmann, P., H. Huang and D. Schoenmaker (eds.) (2018), The Changing Fortunes of Central Banking, Cambridge University Press, Cambridge, UK.
  • Berner, Richard and Kathryn Judge, “The Data Standardization Challenge,” in Systemic Risk in the Financial Sector: Ten Years After the Great Crash, edited by Douglas W. Arner, Emilios Avgouleas, Danny Busch and Steven L. Schwarcz (CIGI Press, 2019)
  • Berner, Richard, Kermit Schoenholtz, and Lawrence White, “Lowering the bar on financial regulation is fraught with risk,” American Banker, June 27, 2019.
  • Berner, Richard, Stephen Cecchetti, Kermit Schoenholtz “Stress Testing Networks: The Case of Central Counterparties,” NBER Working Paper No. 25686, March 2019.
  • Berner, Richard, Kermit Schoenholtz, and Lawrence White, “Here’s how the SEC should decide if companies should report earnings only every 6 months,” MarketWatch, March 16, 2019. 
  • Carr, Peter and Liuren Wu, "Option Profit and Loss Attribution and Pricing: A New Framework" forthcoming, Journal of Finance.
  • Carr, Peter and Liuren Wu, “Leverage Effect, Volatility Feedback, and Self-Exciting Market Disruptions,” Journal of Financial and Quantitative Analysis, 2017.
  • Dhar, Vasant, Tomer Geva, Gal Oestreicher-Singer, and Arun Sundararajan, “Prediction in Economic Networks,” Information Systems Research, Volume 25, Issue 2, June 2014. 
  • Dhar, Vasant, “Prediction and Data Science,” Communications of the ACM, volume 56, number 12, December 2013.
  • Engle, Robert, and Tianyue Ruan. "Measuring the probability of a financial crisis." Proceedings of the National Academy of Sciences 116.37 (2019): 18341-18346.
  • Engle, Robert, “Systemic Risk 10 Years Later,” Annual Review of Financial Economics (2018), Vol. 10:125-152.
  • Engle, Robert, and Christian Brownlees, “SRISK: A Conditional Capital Shortfall Index for Systemic Risk Measurement,” Review of Financial Studies (2017), Volume 30, Issue 1, Pages 48-79.
  • Halaburda, Hanna, and Neil Gandal, “Can We Predict the Winner in a Market with Network Effects? Competition in Cryptocurrency Market,” Games 2016, 7(3), 16.
  • Halaburda, Hanna, Mikołaj Jan Piskorski, and Pınar Yıldırım. "Competing by Restricting Choice: The Case of Matching Platforms," Management Science 64, no. 8 (2017): 3574-3594.
  • King, Lord Mervyn, The End of Alchemy: Money, Banking and the Future of the Global Economy, W.W Norton and Company Inc., 2016.
  • Kolm, Petter N., Reha Tütüncü, and Frank J. Fabozzi. "60 Years of portfolio optimization: Practical challenges and current trends." European Journal of Operational Research 234.2 (2014): 356-371.
  • Kolm, Petter and Gordon Ritter, “Dynamic Replication and Hedging: A Reinforcement Learning Approach,” The Journal of Financial Data Science. Winter 2019, 1 (1) 159-171.
  • Kolm, Petter and Gordon Ritter, “On the Bayesian Interpretation of Black-Litterman” European Journal of Operational Research, Volume 258, Issue 2, 16 April 2017, Pages 564-572. 
  • Kolm, Petter and Gordon Ritter, “Multiperiod Portfolio Selection and Bayesian Dynamic Models” Risk, Vol. 28, Issue 3, p 50-54, March 2015.
  • Miller, Geoffrey Parsons, “The Law of Governance, Risk Management, and Compliance” (Wolters Kluwer 3d ed., 2020; 2d., 2017; 1st ed., 2014). 
  • Miller, Geoffrey Parsons, “Trust, Risk, and Moral Hazard in Financial Markets” (Il Mulino 2011).
  • Miller, Geoffrey Parsons, “The Rise of Risk Management: An Essay in Honor of Peter Nobel,” in Peter Sester, ed., Liber Amicorum Peter Nobel (2015).
  • Philippon, Thomas, Viral Acharya, Lasse Pedersen, and Matthew Richardson “Measuring Systemic Risk,” Review of Financial Studies, 2017.
  • Richardson, Matthew, "Regulating Wall Street: The Dodd-Frank Act," Economic Perspectives, Federal Reserve Bank of Chicago, 2012, 36: 85-97.
  • Subrahmanyam, Marti, Patrick Augustin, and Menachem Brenner, “Informed Options Trading Prior to Takeover Announcements: Insider Trading?” Management Science. May 2019.
  • Schoenholtz, Kermit, Stephen Cecchetti, Michael Feroli, Peter Hooper, and Anil Kashyap, "Deflating Inflation Expectations: The Implications of Inflation's Simple Dynamics". Presented at the US Monetary Policy Forum (March 2017).
  • Walter, Ingo, “Reputational Risk in Large International Banks,” in Federal Reserve Bank of Chicago, Regulatory Issues in Large International Banks (Cambridge, MIT Press, 2017).
  • White, Lawrence J., and Howard Esaki, “Rating Mortgage-Backed Securities: How to End the Race to the Bottom,” Milken Institute Review, Third Quarter 2017.
  • White, Lawrence, Matthew Richardson and Stijn Van Nieuwerburgh, “What to Do about the GSEs?” Annual Review of Financial Economics, 2017.
  • Whitelaw, Robert, Turan Bali, and Nusret Cakici, “Hybrid Tail Risk and Expected Stock Returns: When Does the Tail Wag the Dog?”, 2014, Review of Asset Pricing Studies, Vol. 4, No. 2, pp. 206-246.
  • Xu, Yuqian, Lingjiong Zhu, and Michael Pinedo, "Operational Risk Management - A Stochastic Control Framework with Preventive and Corrective Controls" forthcoming, Operations Research.
  • Zin, Stanley, David K. Backus, and Axelle Ferriere, “Risk and Ambiguity in Models of Business Cycles,” Journal of Monetary Economics, January 2015 (Carnegie Rochester Conference on Public Policy).