**The Center performs and disseminates research on the most important and pressing issues in risk and portfolio management in financial markets.**

### Who we are

The UC Berkeley Center for Risk Management Research was established on July 1, 2013 as the successor to the Coleman Fung Risk Management Research Center. (more)

### Site News

Konstantin Magin and Robert Edelstein Risk Center Working Paper (# 2014-06, # 2015-02 and # 2016-02 ) "Using the CCAPM with Stochastic Taxation and Money Supply to Examine US REITs Pricing Bubbles" has been published in the Journal of Real Estate Research. The final publication is available here. Magin JRER 2017

Robert M. Anderson and Kyong Shik Eom's Risk Center working paper (#2017-01), "Controlling shareholders’ value, long-run firm value and short-term performance" is forthcoming in the Journal of Corporate Finance.

Kyong Shik Eom's Risk Center working paper (#2016-04) "The effect of listing switches from a growth market to a main board: An alternative perspective," has been published in Emerging Markets Review Volume 29, December 2016, Pages 246–273 (PDF of article)

### Presentations and Speaking Engagements

Dr. Kyong Shik Eom will give a series of lectures at The Graduate School of Business at Korea University (October 10th), the Korea Exchange (October 11th), and the Korea Securities Association (October 13th). The title of lectures is “Changes in the Regulatory and Technological Environments for Capital Markets in the U.S. and Europe: Lessons for Korea.” His book, with the same title in Korean, will be published in early December, 2017 by the Korea Exchange.

**Samim Ghamami** presented “Static Models of Central Counterparty Risk” at the upcoming “Regulating Systemic Risk: Insights from Mathematical Modeling” workshop at the Isaac Newton Institute for Mathematical Sciences at University of Cambridge between December 15th and December 19th, 2015

**Alex Shkolnik** presented "Systemic Risk in the Repo Market" at the Consortium for Systemic Risk Meeting (CSRA) on December 15th, 2015

**Global Derivatives USA**

**Speaker: Lisa Goldberg
Date**: November 17, 2015

"On a Convex Measure of Drawdown Risk"

**Stanford University**

**Speaker: Lisa Goldberg
Date:** November 5, 2015

Center for Financial and Risk Analytics Seminar

"Futures Financing Rates"

### Newest Working Papers

** Collateralized Networks
**Samim Ghamami, Paul Glasserman, and H. Peyton Young

This paper studies the spread of losses and defaults in financial networks with two important features: collateral requirements and alternative contract termination rules in bankruptcy. When collateral is committed to a firm's counterparties, a solvent firm may default if it lacks sufficient liquid assets to meet its payment obligations. Collateral requirements can thus increase defaults and payment shortfalls. Moreover, one firm may benefit from the failure of another if the failure frees collateral committed by the surviving firm, giving it additional resources to make other payments. Contract termination at default may also improve the ability of other firms to meet their obligations. As a consequence of these features, the timing of payments and collateral liquidation must be carefully specified, and establishing the existence of payments that clear the network becomes more complex. Using this framework, we study the consequences of illiquid collateral for the spread of losses through fire sales; we compare networks with and without selective contract termination; and we analyze the impact of alternative bankruptcy stay rules that limit the seizure of collateral at default. Under an upper bound on derivatives leverage, full termination reduces payment shortfalls compared with selective termination.

**Infinite Horizon CCAPM with Stochastic Taxation and Monetary Policy**

Konstantin Magin

Revised from the Center for Risk Management Research Working Paper 2018-01

This paper derives the infinite horizon CCAPM with heterogeneous agents, stochastic

dividend taxation, and monetay policy. I find that under reasonable assumptions on assets

dividends and probability distributions of the future dividend taxes and consumption, the

model implies the constant price/after-tax dividend ratios. I also obtain that the higher

current and expected dividend tax rates imply lower current asset prices. Finally, contrary

to popular belief, monetary policy is neutral, in the long run, with respect to the real

equilibrium asset prices.

**Infinite Horizon CCAPM with Stochastic Taxation and Monetary Policy**

Konstantin Magin

Revised from the Center for Risk Management Research Working Paper 2016-01

This paper derives the infinite horizon CCAPM with heterogeneous agents, stochastic

dividend taxation, and monetary policy. I find that under reasonable assumptions on assets

dividends and probability distributions of the future dividend taxes and consumption, the

model implies the constant price/after-tax dividend ratios. I also obtain that the higher

current and expected dividend tax rates imply lower current asset prices. Finally, contrary

to popular belief, monetary policy is neutral, in the long run, with respect to the real

equilibrium asset prices.

**Comparative Statics of Equilibria with Respect to Stochastic Tax Rates**

Konstantin Magin

Revised from the Center for Risk Management Research Working Papers 2016-03 and 2017-02

This paper studies equilibrium comparative statics in the finite horizon CCAPM with respect to changes in stochastic tax rates imposed on agentsíendowments and dividends. We show that under reasonable assumptions, without assuming CRRA and identical agents, an increase in the current dividend tax rate unambiguously reduces current asset prices. The paper also finds that there exists a bound B such that for a coefficient of relative risk aversion less than B, an increase in a future dividend tax rate reduces current price of tradable assets. At the same time, for a coefficient of relative risk aversion greater than B, an increase in a future dividend tax rate boosts the current price of tradable assets. Finally, for a coefficient of relative risk aversion equal to B, an increase in a future dividend tax rate leaves current price of tradable assets unchanged. As a special case, under additional assumptions, B is equal to 1. Also, under reasonable assumptions, an increase in the current endowment tax rate reduces current asset prices, while an increase in a future endowment tax rate boosts current asset prices.

**Submodular Risk Allocation**

Samim Ghamami and Paul Glasserman

submitted, August 2017

We analyze the optimal allocation of trades to portfolios when the cost associated with an allocation is proportional to each portfolio's risk. Our investigation is motivated by changes in the over-the-counter derivatives markets, under which some contracts may be traded bilaterally or through central counterparties, splitting a set of trades into two or more portfolios. A derivatives dealer faces risk-based collateral and capital costs for each portfolio, and it seeks to minimize these costs through its allocation of trades to portfolios. When margin requirements are submodular, the problem becomes a submodular intersection problem. Its dual provides per-trade margin attributions, and assigning trades to portfolios based on the lowest attributed costs yields an optimal allocation. As part of this investigation, we derive conditions under which standard deviation and other risk measures are submodular functions of sets of trades. We compare systemwide optimality with individually optimal allocations in a market with multiple dealers.

Read more…