Journal of Risk

Farid AitSahlia    
Warrington College of Business, University of Florida

The topics covered in this issue of The Journal of Risk are the regulation of US regional banks since the 2007–9 global financial crisis, nonparametric estimation of spectral risk measures, options-based inference of investor sentiment, and the optimal pricing of alternative risk transfer assets in reinsurance portfolios.

In the first paper in the issue, “US regional banks: challenges and opportunities”, Hélyette Geman and Olivier Levyne use an empirical illustration and classical bank run models to show how the lifting of certain regulations after the global financial crisis affected the stability of US regional banks. Their analysis highlights, in particular, systemic effects and the contrasts between the European Union and the United States within the context of the Basel III agreement.

The issue’s second paper, “Kernel-based estimation of spectral risk measures” by Suparna Biswas and Rituparna Sen, introduces a nonparametric method in the form of L-statistics to estimate spectral risk measures, which are coherent measures that account for traders’ risk aversion. Biswas and Sen show that their kernel-based method results in estimators that are asymptotically normally distributed. Further, they offer an empirical analysis based on data from around the world to support the superiority of their approach relative to a standard kernel-based approach and to compare the riskiness of different exchanges. The associate editors and I extend our thanks to Hélyette Geman for her assistance with the editorial process for this paper.

In “Analyzing market sentiment based on the option-implied distribution of stock returns”, our third paper, Shu Ling Chiang and Ming Shann Tsai advocate for an assessment of investor sentiment that makes use of options-implied stock return distributions.Based on Taiwan Stock Exchange data, Chiang and Tsai identify which factors (eg, trading volume, open interest, put–call ratio) primarily drive this new sentiment measure.

The final paper in the issue, “Pricing and optimization of sidecar and collateralized reinsurance portfolios with stochastic programming” by Nick Georgiopoulos, focuses on solvency risk transfer alternatives to loss reserve capital. Specifically, Georgiopoulos shows how to adapt stochastic programming for the pricing and optimization of portfolios of sidecars and collateralized reinsurance structures in order to address the significant associated computational hurdles.