Risk Transfer Vs Risk Sharing

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Risk Transfer Vs Risk Sharing

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Author : Leslie Terebessy
language : en
Publisher: Independently Published
Release Date : 2021-04-17

Risk Transfer Vs Risk Sharing written by Leslie Terebessy and has been published by Independently Published this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021-04-17 with categories.

"Risk is the possibility of an adverse or disastrous outcome of a given action. Risk arises out of the fact that our knowledge, in particular our knowledge of the future, is limited. While the past may be relatively well known, future is unknown. It is tempting to predict the future on the basis of the past, according to the dictum, "history repeats itself." However, no single model takes into account all variables that may influence the outcome of a given act. The existence of risk implies a limit on our ability the control our fate. Some contingencies may be unforeseen. While science attempts to control the environment, inclusive of future events, history has shown repeatedly that human control is always incomplete. Complete control rests only with God. Risks arise in all walks of life. A person driving through a red light takes a risk of getting involved in an accident. A smoker takes the risk of developing cancer. A gambler takes the risk of losing money. There is a risk of fire, or the risk of becoming a victim of crime. There is a risk of being kidnapped, being mistaken for someone else, or the risk of becoming an innocent victim. There is also the risk of physical or psychological injury, illness or an outbreak of epidemic, on a local or a global scale. Natural disasters, such as floods, earthquakes or tsunamis also present risks. There is also a risk of war, civil war, or even a world war. There is a risk of political instability (rioting or a coup d'état). There is a risk of property loss or damage, or a risk of disgrace (damage to one's reputation). Everything from wearing protective clothing, starting a retirement fund, to spending on defence is a different way of shielding oneself or one's community from risk and the fundamental insecurity that characterises all human existence. Risks can be divided into avoidable and unavoidable. Avoidable risks, such as the risk of loss arising from gambling (qimar), are self-imposed. In order to avoid such risks one merely needs to abstain from the activities that give rise to them. Other risks, such as the risk of losses in business, may be unavoidable. In principle, unavoidable risks are permitted, but avoidable are not. Hence, risk taking is permitted in business but not in gambling. The fact that risk in business is unavoidable makes it fundamentally different from risks such as arise in gambling. In gambling, one party can win only if another loses. Gambling is thus a "win-lose" or "zero sum game." By contrast, partners in business gain or suffer a loss together. In finance, risks arise in both investment as well as in lending. The main risk in investment is the risk of losses. The main risk in lending is the risk that borrowers may fail to repay their loans to creditors. This risk is known as credit risk, also known as the risk of default or more simply as counterparty risk. A common method of protecting against credit risk is simply to withhold lending from all borrowers unable to post acceptable collateral. At the company level another method is for lenders to purchase credit derivatives such as credit default swaps (CDS), effectively a form of insurance on debt. Another risk that arises in lending is interest risk. This is the risk that interest rates may change in an unfavourable direction. A common method of protection against interest risk is to enter into interest rate swap (IRS) contracts. Liquidity risk arises in both lending and investment. This risk arises from the fact that it may become difficult if not impossible to liquidate securities, whether stocks or bonds, at a time of crisis. Liquidity crises commonly take place when investors wish to liquidate their assets at the same time. Selling pressure drives prices down and makes it impossible to liquidate securities at any but rock bottom prices. This is essentially what transpired during the recent 2008 global financial crisis.

Alternative Risk Transfer

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Author : Erik Banks
language : en
Publisher: John Wiley & Sons
Release Date : 2004-03-05

Alternative Risk Transfer written by Erik Banks and has been published by John Wiley & Sons this book supported file pdf, txt, epub, kindle and other format this book has been release on 2004-03-05 with Business & Economics categories.

A practical approach to ART-an alternative method by which companies take on various types of risk This comprehensive book shows readers what ART is, how it can be used to mitigate risk, and how certain instruments/structures associated with ART should be implemented. Through numerous examples and case studies, readers will learn what actually works and what doesn't when using this technique. Erik Banks (CT) joined XL Capital's weather/energy risk management subsidiary, Element Re, as a Partner and Chief Risk Officer in 2001.

Applying Risk Sharing Finance For Economic Development

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Author : Putri Swastika
language : en
Publisher: Springer Nature
Release Date : 2021-09-13

Applying Risk Sharing Finance For Economic Development written by Putri Swastika and has been published by Springer Nature this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021-09-13 with Social Science categories.

This book examines the application of risk-sharing finance as a national economic policy in history and how it stimulated economic recovery during a short period in Germany between 1933 and 1935. Economic history indicates that risk-sharing instruments have promoted socio-economic development in many parts of the world while risk-shifting methods have imposed huge socio-economic costs on many nations, leading to debt slavery on individual members. This book highlights lessons to be learned from history and argues that risk-sharing is a powerful tool for generating rapid economic recovery and resumption of growth.

Risk

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Author : Louis Eeckhoudt
language : en
Publisher:
Release Date : 1995

Risk written by Louis Eeckhoudt and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1995 with Self-Help categories.

"The fundamental topic of choice thory- how do economic agents decide when faces with a situalion of risk- and its accompanying theoretical models are here dissected and analyzed. Using a textbook style, the authors present the microfoundations of risk, uncertainty and its management with specific application to insurance and finance. The book analyzes the formal evalustion of risky situations, analyzes individual decisions under uncertainty and determines the markets for risk, including market incompleteness and risk transfer and welfar..."

The Art Of Risk Management

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Author : Christopher L. Culp
language : en
Publisher: John Wiley & Sons
Release Date : 2002-07-11

The Art Of Risk Management written by Christopher L. Culp and has been published by John Wiley & Sons this book supported file pdf, txt, epub, kindle and other format this book has been release on 2002-07-11 with Business & Economics categories.

Learn about today's hottest new risk management tools One of the hottest areas of finance today, alternative risk transfer, or ART, refers to the use of various insurance products to manage market, credit, operational, legal, environmental, and other forms of risk. As the capital and insurance markets continue to converge, the number and complexity of new risk-defraying insurance products available to corporations, brokerages, money managers and other financial professionals will continue to grow. Expert Christopher L. Culp uses case studies of recent ART transactions used by risk managers to put the field into perspective for financial professionals and to acquaint them with the various types of risk control products now available. In addition he explores, in-depth, the links between ART, derivatives and bank-arranged risk financing, and he explains the key differences between classic insurance products and financial guarantees, risk financing, bundled layering, and other ART forms.

Antifragility Of Islamic Finance

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Author : Umar Rafi
language : en
Publisher: Finance, FinTech, and Crowdfunding in Islam
Release Date : 2017-11-15

Antifragility Of Islamic Finance written by Umar Rafi and has been published by Finance, FinTech, and Crowdfunding in Islam this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017-11-15 with Finance categories.

Antifragility of Islamic Finance: The Risk-Sharing Alternative explains how risk-sharing, as defined under Islamic finance, makes financial systems antifragile. It highlights the benefits of 100% equity-based finance over debt-based finance. The recent financial crisis has given rise to discussions on a new approach to risk management called antifragility. This concept specifies conditions under which systems become resilient to shocks caused by Black Swans--highly unpredictable outlier events that have a major negative (or positive) consequence when they occur, with their occurrence only explained retrospectively. Per this concept, the long-term survivability of any system centers exclusively on its antifragile nature, that is, its ability to absorb and even benefit from Black Swan-type shocks. This book aims to investigate risk-sharing Islamic finance as an antifragile system. As a by-product of the Great Recession, the problems of debt-based financial systems are starting to be highlighted by industry and by academia. The antifragile solution for avoiding future financial crises is primarily centered on moving the existing financial system towards more equity and less debt, thereby introducing skin-in-the-game into financial transactions. This book introduces a model of a 100% equity-based financial system, centered on risk sharing, as a possible alternative to the contemporary debt-based, conventional financial system, which is based on risk transfer and on risk shifting. In essence, this book attempts to provide a practical model for an antifragile financial system by evaluating the characteristics of Islamic finance under the criteria of antifragility.

Risk Sharing Finance

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Author : Saad Bakkali
language : en
Publisher: Walter de Gruyter GmbH & Co KG
Release Date : 2021-05-10

Risk Sharing Finance written by Saad Bakkali and has been published by Walter de Gruyter GmbH & Co KG this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021-05-10 with Business & Economics categories.

The contemporary finance deals mainly with multilateral and multi-counterparty transactions. Islamic Jurisprudence (Fiqh) has yet to develop its conceptualization of this modality of financing. Thus far, it has become a norm for large financing projects to rely on a complex structure of interconnected bilateral contracts that in totality becomes opaque, complex and costly. An unfortunate result of the unavailability of an efficient Fiqhi model applicable to modern multilateral and multi-counterparty contracts has been the fact that the present Islamic finance has been forced to replicate conventional risk-transfer (interest rate based) debt contracts thus drawing severe criticisms of duplicating conventional finance. In 2012, a gathering of some of the Muslim world’s most prominent experts in Jurisprudence (Fuqaha) and economists issued the Kuala Lumpur Declaration (Fatwa) in which they identified risk sharing as the essence of Islamic finance. The Declaration opened the door for a new Fiqh approach to take the lead in developing the jurisprudence of multilateral and multi-counterparty transactions. This Declaration (Fatwa) provides a prime motivation to search for a comprehensive model of risk sharing that can serve as an archetypal contract encompassing all potential contemporary financial transactions. From the perspective of Islamic Jurisprudence (Fiqh), the technicalities of the concept of risk sharing in contemporary finance have yet to be defined in Islamic literature. This book attempts to clarify and shed light on these technicalities from the perspective of Fiqh. It is a comprehensive study that relies on the fundamental Islamic sources to establish a theoretical and practical perspective of Fiqh encompassing risk-sharing Islamic finance as envisioned in the Kuala Lumpur Declaration of 2012. This new paradigm should lead to a more efficient approach to multilateral and multi-counterparty Islamic contracts which, here-to-fore has been lacking in the current configuration of Islamic finance.

Risk Sharing Risk Spreading And Efficient Regulation

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Author : T.V.S. Ramamohan Rao
language : en
Publisher: Springer
Release Date : 2015-10-22

Risk Sharing Risk Spreading And Efficient Regulation written by T.V.S. Ramamohan Rao and has been published by Springer this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015-10-22 with Business & Economics categories.

The book provides an integrated approach to risk sharing, risk spreading and efficient regulation through principal agent models. It emphasizes the role of information asymmetry and risk sharing in contracts as an alternative to transaction cost considerations. It examines how contracting, as an institutional mechanism to conduct transactions, spreads risks while attempting consolidation. It further highlights the shifting emphasis in contracts from Coasian transaction cost saving to risk sharing and shows how it creates difficulties associated with risk spreading, and emphasizes the need for efficient regulation of contracts at various levels. Each of the chapters is structured using a principal agent model, and all chapters incorporate adverse selection (and exogenous randomness) as a result of information asymmetry, as well as moral hazard (and endogenous randomness) due to the self-interest-seeking behavior on the part of the participants.

Insurance Linked Securities

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Author : Christoph Weber
language : en
Publisher: Springer Science & Business Media
Release Date : 2011-06-28

Insurance Linked Securities written by Christoph Weber and has been published by Springer Science & Business Media this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011-06-28 with Business & Economics categories.

Securitisations of insurance risk as new methods of risk transfer have been emerging in the global financial market during the recent twenty years. Christoph Weber analyses the techniques of traditional methods in comparison with securitisations for life- and non-life insurance risk.

Public Private Partnerships In Pursuit Of Risk Sharing And Value For Money

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Author : OECD
language : en
Publisher: OECD Publishing
Release Date : 2008-05-21

Public Private Partnerships In Pursuit Of Risk Sharing And Value For Money written by OECD and has been published by OECD Publishing this book supported file pdf, txt, epub, kindle and other format this book has been release on 2008-05-21 with categories.

This book highlights good practices and summarises what countries should consider before entering into public-private partnerships (PPPs).