The Centre for Asset Pricing Research (CAPR) serves as a bridge between academia and the financial industry.
Harry Markowitz famously said that diversification is the only free lunch in investing. While the logic of diversification is indeed undeniable, the choices it requires can be quite painful. Learn more here.
In addition to credit risk and market risk, financial institutions also face operational risk, which arises as a consequence of flawed and outdated systems, policy failures, and employee conduct. Learn more here.
Imagine you are a bank that lends money to companies with low credit ratings. You know that these loans are risky, but you also know that they offer high returns. How do you balance the trade-off between risk and reward?
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It all started on a cloudy day in July 2017. The head of the Financial Conduct Authority (FCA), Andrew Bailey, was frustrated. His agency was overseeing the daily publication of the London Interbank Offered Rate (Libor), an interest rate that should reflect banks’ short-term funding costs. Learn more here.
The Bank of England (BoE) recently intervened in the UK government bond market to restore market functioning. The bond market faced severe selling pressure in September 2022 after the government proposed vast unfunded tax cuts. Learn more here
The Financial Supervisory Authority (FSA) has recommended tightening the mortgage regulation. Is it necessary for FSA to make the regulation “even stricter” under the current macroeconomic environment? Learn more here.
The energy incentives are distorted with a larger subsidy and higher prices. Is there a policy which is fairly simple and more effective for preserving energy incentives during the current special times? Learn more here.