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Catastrophe risk has long been recognized to pose a serious threat to the insurance sector. Catastrophe risk pooling offers an effective way to diversify losses arising from catastrophic events. In this paper, we investigate a structure of…
We consider an economy composed of different risk profile regions wishing to be hedged against a disaster risk using multi-region catastrophe insurance. Such catastrophic events inherently have a systemic component; we consider situations…
For centuries, national economies created wealth by engaging in international trade and production. The resulting international supply networks not only increase wealth for countries, but also create systemic risk: economic shocks,…
Extreme events, exacerbated by climate change, pose significant risks to the energy system and its consumers. However there are natural limits to the degree of protection that can be delivered from a centralised market architecture.…
Climate adaptation could yield significant benefits. However, the uncertainty of which future climate scenarios will occur decreases the feasibility of proactively adapting. Climate adaptation projects could be underwritten by benefits paid…
We live in a world in which there is a great disparity between the lives of the rich and the poor. Technology offers great promise in bridging this gap. In particular, wireless technology unfetters developing communities from the…
Systemic risk arises as a multi-layer network phenomenon. Layers represent direct financial exposures of various types, including interbank liabilities, derivative- or foreign exchange exposures. Another network layer of systemic risk…
Natural hazards can considerably impact the overall society of a country. As some degree of public sector involvement is always necessary to deal with the consequences of natural disasters, central governments have increasingly invested in…
Portfolio optimisation typically aims to provide an optimal allocation that minimises risk, at a given return target, by diversifying over different investments. However, the potential scope of such risk diversification can be limited if…
Recurring international financial crises have adverse socioeconomic effects and demand novel regulatory instruments or strategies for risk management and market stabilization. However, the complex web of market interactions often impedes…
This paper explores a mechanism for mitigating sovereign risk in emerging markets without risks mutualization. The mechanism involves pooling diversified portfolios of sovereign bonds and issuing them in tranches, with the senior tranche…
We propose local prediction pools as a method for combining the predictive distributions of a set of experts conditional on a set of variables believed to be related to the predictive accuracy of the experts. This is done in a two step…
This paper studies proportional risk sharing at claim occurrence time in community-based insurance. Each participant is modeled by an individual Cram\'er-Lundberg surplus process, and, whenever a claim is reported within the pool, its cost…
The basic principle of any version of insurance is the paradigm that exchanging risk by sharing it in a pool is beneficial for the participants. In case of independent risks with a finite mean this is the case for risk averse decision…
This paper proposes a public-private insurance scheme for earthquakes and floods in Italy in which property-owners, the insurer and the government co-operate in risk financing. Our model departs from the existing literature by describing a…
Previous studies show that natural disasters decelerate economic growth, and more so in countries with lower financial development. We confirm these results with more recent data. We are the first to show that fiscal stability reduces the…
Managing coastal flood risks involves choosing among portfolios of different options. Analyzing these choices typically requires a model. State-of-the-art coastal risk models provide detailed regional information, but can be difficult to…
In a globalised world, inflation in a given country may be becoming less responsive to domestic economic activity, while being increasingly determined by international conditions. Consequently, understanding the international sources of…
We consider the problem of risk diversification in complex networks. Nodes represent e.g. financial actors, whereas weighted links represent e.g. financial obligations (credits/debts). Each node has a risk to fail because of losses…
Risk diversification is the basis of insurance and investment. It is thus crucial to study the effects that could limit it. One of them is the existence of systemic risk that affects all the policies at the same time. We introduce here a…