**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

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)

Konstantin Magin's Risk Center working paper (# 2009-01 and 2013-04), "Equity Risk Premium and Insecure Property Rights," has been published in Economic Theory Bulletin. The final publication is available here.

### 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

** 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.

**Equilibrium Comparative Statics in Finite Horizon Finance Economies with Stochastic Taxation**

Konstantin Magin

Revised from the Center for Risk Management Research Working Paper 2016-03

This paper studies equilibrium comparative statics of Financial Markets (FM) equilibria in the ﬁnite horizon General Equilibrium with Incomplete Markets (GEI) model with respect to changes in stochastic tax rates imposed on agents’ endowments 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 term 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.

**Controlling shareholders’ value, long-run firm value and short-term performance**

Hyung Cheol Kang, Robert M. Anderson, Kyong Shik Eom, and Sang Koo Kang

We propose a new determinant of firm value within a business group essay writer: controlling shareholders’ value (CSV), the value of controlling shareholders’ stake in an affiliate divided by their stake in all affiliates. We posit that controlling shareholders focus attention on the high-CSV affiliates. Using data on Korean family-controlled business groups, we find that CSV has greater explanatory power for firm performance than traditional cash flow rights (CFR). We also find that, among affiliates with non-family CEOs, higher CSV is associated with higher Tobin’s Q and lower EBITDA, indicating that controlling shareholders and non-family CEO have successfully addressed their principal-agent problem.

**The effect of listing switches from a growth market to a main board: An alternative perspective**

Jong-Ho Park, Ki Beom Binh, and Kyong Shik Eom

Published in Emerging Markets Review Volume 29, December 2016, Pages 246–273 (PDF of article)

We examine whether firms switching listings from the Korean growth market (KOSDAQ) to the main board (KOSPI) experienced improved trading-related market quality. We focus on market macrostructure and use a difference-in-difference technique with nearest matching. Contrary to previous research and practitioners’ opinions, we find that trading-related market quality mostly deteriorated or remained unchanged following the switch, indicating that the specific market macrostructure of a country matters. Listing switches produce a negative externality by weakening KOSDAQ and thereby impairing funding for innovative new firms, suggesting that policymakers should encourage firms whose characteristics fit the standalone growth market to remain listed there.

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