Next Issue
Volume 13, July
Previous Issue
Volume 13, May
 
 
Search for Articles:
Title / Keyword
Author / Affiliation / Email
Journal
Article Type
 
 
Advanced Search
 
Section
Special Issue
Volume
Issue
Number
Page
 
5.0
1.5
Journals
Risks
Volume 13
Issue 6
share announcement

Risks, Volume 13, Issue 6 (June 2025) – 18 articles

Cover Story (view full-size image): Although levels of the European natural gas market surged after the COVID-19 pandemic and the Russia–Ukraine conflict, the futures curve still shows a strong seasonal pattern. Pricing models must reflect this, ensuring consistency with no-arbitrage conditions on the risk-neutral drift of the spot price, where seasonality is embedded. On the other side, when considering future pricing options, constant volatility assumptions must be relaxed: accurate pricing requires incorporating both seasonality and time-varying volatility. View this paper
  • Issues are regarded as officially published after their release is announced to the table of contents alert mailing list.
  • You may sign up for e-mail alerts to receive table of contents of newly released issues.
  • PDF is the official format for papers published in both, html and pdf forms. To view the papers in pdf format, click on the "PDF Full-text" link, and use the free Adobe Reader to open them.
Order results
Result details
Show export options expand_more Show export options expand_less
Select all
Export citation of selected articles as:
14 pages, 537 KiB  
Article
Non-Uniqueness of Best-Of Option Prices Under Basket Calibration
by Mohammed Ahnouch, Lotfi Elaachak and Abderrahim Ghadi
Risks 2025, 13(6), 117; https://doi.org/10.3390/risks13060117 - 18 Jun 2025
Viewed by 294
Abstract
This paper demonstrates that perfectly calibrating a multi-asset model to observed market prices of all basket call options is insufficient to uniquely determine the price of a best-of call option. Previous research on multi-asset option pricing has primarily focused on complete market settings [...] Read more.
This paper demonstrates that perfectly calibrating a multi-asset model to observed market prices of all basket call options is insufficient to uniquely determine the price of a best-of call option. Previous research on multi-asset option pricing has primarily focused on complete market settings or assumed specific parametric models, leaving fundamental questions about model risk and pricing uniqueness in incomplete markets inadequately addressed. This limitation has critical practical implications: derivatives practitioners who hedge best-of options using basket-equivalent instruments face fundamental distributional uncertainty that compounds the well-recognized non-linearity challenges. We establish this non-uniqueness using convex analysis (extreme ray characterization demonstrating geometric incompatibility between payoff structures), measure theory (explicit construction of distinct equivalent probability measures), and geometric analysis (payoff structure comparison). Specifically, we prove that the set of equivalent probability measures consistent with observed basket prices contains distinct measures yielding different best-of option prices, with explicit no-arbitrage bounds [aK,bK] quantifying this uncertainty. Our theoretical contribution provides the first rigorous mathematical foundation for several empirically observed market phenomena: wide bid-ask spreads on extremal options, practitioners’ preference for over-hedging strategies, and substantial model reserves for exotic derivatives. We demonstrate through concrete examples that substantial model risk persists even with perfect basket calibration and equivalent measure constraints. For risk-neutral pricing applications, equivalent martingale measure constraints can be imposed using optimal transport theory, though this requires additional mathematical complexity via Schrödinger bridge techniques while preserving our fundamental non-uniqueness results. The findings establish that additional market instruments beyond basket options are mathematically necessary for robust exotic derivative pricing. Full article
►▼ Show Figures

Figure 1

26 pages, 824 KiB  
Article
Advancing Credit Rating Prediction: The Role of Machine Learning in Corporate Credit Rating Assessment
by Nazário Augusto de Oliveira and Leonardo Fernando Cruz Basso
Risks 2025, 13(6), 116; https://doi.org/10.3390/risks13060116 - 17 Jun 2025
Viewed by 1019
Abstract
Accurate corporate credit ratings are essential for financial risk assessment; yet, traditional methodologies relying on manual evaluation and basic statistical models often fall short in dynamic economic conditions. This study investigated the potential of machine-learning (ML) algorithms as a more precise and adaptable [...] Read more.
Accurate corporate credit ratings are essential for financial risk assessment; yet, traditional methodologies relying on manual evaluation and basic statistical models often fall short in dynamic economic conditions. This study investigated the potential of machine-learning (ML) algorithms as a more precise and adaptable alternative for credit rating predictions. Using a seven-year dataset from S&P Capital IQ Pro, corporate credit ratings across 20 countries were analyzed, leveraging 51 financial and business risk variables. The study evaluated multiple ML models, including Logistic Regression, Support Vector Machines, Decision Trees, Random Forest, Gradient Boosting (GB), and Neural Networks, using rigorous data pre-processing, feature selection, and validation techniques. Results indicate that Artificial Neural Networks (ANN) and GB consistently outperform traditional models, particularly in capturing non-linear relationships and complex interactions among predictive factors. This study advances financial risk management by demonstrating the efficacy of ML-driven credit rating systems, offering a more accurate, efficient, and scalable solution. Additionally, it provides practical insights for financial institutions aiming to enhance their risk assessment frameworks. Future research should explore alternative data sources, real-time analytics, and model explainability to facilitate regulatory adoption. Full article
(This article belongs to the Special Issue Risk and Return Analysis in the Stock Market)
►▼ Show Figures

Figure 1

11 pages, 509 KiB  
Article
Do Regulations and Insurance Knowledge Affect Insurance Demand? Evidence from Bicycle Insurance in Japan
by Yoshihiro Asai
Risks 2025, 13(6), 115; https://doi.org/10.3390/risks13060115 - 17 Jun 2025
Viewed by 312
Abstract
Several empirical studies have attempted to clarify whether differences in regulations affect people’s behavior. However, due to a lack of data, few have attempted to clarify whether these differences affect the purchase of insurance. Therefore, in this study, I conducted a survey of [...] Read more.
Several empirical studies have attempted to clarify whether differences in regulations affect people’s behavior. However, due to a lack of data, few have attempted to clarify whether these differences affect the purchase of insurance. Therefore, in this study, I conducted a survey of consumers in Japan and analyzed the characteristics of those who bought bicycle insurance. My findings are as follows: First, users tend to purchase bicycle insurance in prefectures where it is compulsory. Second, bicycle users with a high level of insurance knowledge tend to purchase insurance. Third, consumers who use bicycles more frequently tend to purchase insurance. Full article
(This article belongs to the Special Issue Advancements in Actuarial Mathematics and Insurance Risk Management)
►▼ Show Figures

Figure 1

25 pages, 486 KiB  
Article
The Impact of ESG on the Financial Performance of Johannesburg Stock Exchange-Listed Companies
by Wilfreda Indira Chawarura, Mabutho Sibanda and Kuziva Mamvura
Risks 2025, 13(6), 114; https://doi.org/10.3390/risks13060114 - 17 Jun 2025
Viewed by 721
Abstract
The relationship between ESG and firm performance is complex and tends to yield mixed results globally. In South Africa, ESG implementation is still in its infancy stage due to economic and developmental challenges. Despite these challenges, the JSE introduced sustainability disclosure guidelines in [...] Read more.
The relationship between ESG and firm performance is complex and tends to yield mixed results globally. In South Africa, ESG implementation is still in its infancy stage due to economic and developmental challenges. Despite these challenges, the JSE introduced sustainability disclosure guidelines in 2022 to enhance ESG adoption in South Africa. Thus, the study seeks to understand the impact of ESG and firm size on the financial performance of JSE-listed firms in South Africa. The study utilised the JSE Top 40 firms for the period from 2002 to 2022. Furthermore, the study employed a two-step System Generalised Method of Moments, to estimate the impact of total ESG and individual dimensions of ESG on firm financial performance. Additionally, the study examined the moderating effects of firm size on the relationship between financial performance and ESG. The results revealed a positive and significant relationship between total ESG and firm financial performance. However, the findings regarding individual ESG dimensions and firm performance are mixed. Firm size has a moderating effect on the relationship between ESG and firm financial performance. The implication of these findings for South Africa is increased foreign direct investment from green investors and listed firms seriously considering ESG in their operations. Full article
21 pages, 4044 KiB  
Article
Dynamic Portfolio Optimization with Diversification Analysis and Asset Selection Amidst High Correlation Using Cryptocurrencies and Bank Equities
by Hamdan Bukenya Ntare, John Weirstrass Muteba Mwamba and Franck Adekambi
Risks 2025, 13(6), 113; https://doi.org/10.3390/risks13060113 - 16 Jun 2025
Viewed by 689
Abstract
There has been growing interest among investors to include cryptocurrencies in their portfolios because of their diversification potential. However, the diversification role of cryptocurrencies when added to South African bank equities is yet to be determined. This study rigorously evaluates asset co-movement and [...] Read more.
There has been growing interest among investors to include cryptocurrencies in their portfolios because of their diversification potential. However, the diversification role of cryptocurrencies when added to South African bank equities is yet to be determined. This study rigorously evaluates asset co-movement and diversification benefits of integrating cryptocurrencies into South African bank equity portfolios. Using advanced financial engineering techniques, including multi-asset particle swarm optimizer (MA-PSO), random optimizer, and a static equal-weighted portfolio (EWP) model, this study analyzed the dynamic portfolio performance and diversification of cryptocurrencies in the 2017–2024 period. The portfolio performance of the three methods is also compared with the results from the traditional one-period mean–variance optimization (MVO) method. The findings underscore the superiority of dynamic models over static EWP in assessing the impact of cryptocurrency inclusion in bank equity portfolios. While pre-COVID-19 studies identified cryptocurrencies as effective hedges against market downturns, this protective role appears attenuated in the post-COVID-19 era. The dynamic MA-PSO model emerges as the optimal approach, delivering better-diversified portfolios. Consequently, South African portfolio managers must carefully evaluate investor risk tolerance before incorporating cryptocurrencies, with regulators imposing stringent guidelines to mitigate potential losses. Full article
►▼ Show Figures

Figure 1

20 pages, 2552 KiB  
Article
Evaluation of Perpetual American Put Options with General Payoff
by Luca Anzilli and Lucianna Cananà
Risks 2025, 13(6), 112; https://doi.org/10.3390/risks13060112 - 13 Jun 2025
Viewed by 234
Abstract
In this paper, we study perpetual American put options with a generalized standard put payoff and establish sufficient conditions for the existence and uniqueness of the solution to the associated pricing problem. As a key tool, we express the Black–Scholes operator in terms [...] Read more.
In this paper, we study perpetual American put options with a generalized standard put payoff and establish sufficient conditions for the existence and uniqueness of the solution to the associated pricing problem. As a key tool, we express the Black–Scholes operator in terms of elasticity. This formulation enables us to demonstrate that the considered pricing problem admits a unique solution when the payoff function exhibits strictly decreasing elasticity with respect to the underlying asset. Furthermore, this approach allows us to derive closed-form solutions for option pricing. Full article
(This article belongs to the Special Issue Financial Derivatives and Hedging in Energy Markets)
►▼ Show Figures

Figure 1

20 pages, 641 KiB  
Article
Stochastic Uncertainty of Institutional Quality and the Corporate Capital Structure in the G8 and MENA Countries
by Tarek Eldomiaty, Islam Azzam, Jasmine Fouad, Hussein Mowafak Sadek and Marwa Anwar Sedik
Risks 2025, 13(6), 111; https://doi.org/10.3390/risks13060111 - 12 Jun 2025
Viewed by 455
Abstract
This paper examines the impacts of observed versus uncertain (stochastic) institutional quality of corporate debt financing. This paper compares the impacts of two distinct levels of institutional quality in developed and developing economies. World governance indicators (WGIs) are used as proxies for institutional [...] Read more.
This paper examines the impacts of observed versus uncertain (stochastic) institutional quality of corporate debt financing. This paper compares the impacts of two distinct levels of institutional quality in developed and developing economies. World governance indicators (WGIs) are used as proxies for institutional quality. Stochastic Geometric Brownian Motion (GBM) is used to quantify the institutional uncertainty of WGIs. The results of GLS estimates using a sample of 309 nonfinancial listed firms in G8 countries and 373 nonfinancial listed firms in MENA countries covering the years 2016–2022 show (a) positive (negative) stochastic impacts of voice and accountability (government effectiveness and political stability) on debt financing in the G8 and MENA regions; (b) although potential improvements in institutional quality are shared concerns among G8 and MENA countries, the former outperforms the latter in terms of creditors’ contract protection and enforcement, paving the way for public policy makers in the MENA region to enhance regulations that protect debt contractual obligations; (c) macroeconomic variables have sporadic impacts; GDP growth is significant in G8 but not in MENA countries; (d) the negative impacts of inflation rates are consistent in both regions; and (e) unemployment plays a negative signaling role in the G8 region only. This paper contributes to the related literature by examining the uncertain impact of institutional quality on corporate debt financing. This paper offers implications for policy makers, directing them to focus on institutional endeavors in a way that helps companies secure the debt financing required to support investment growth. Full article
►▼ Show Figures

Figure 1

19 pages, 447 KiB  
Article
Stock Returns’ Co-Movement: A Spatial Model with Convex Combination of Connectivity Matrices
by Nadia Ben Abdallah, Halim Dabbou, Mohamed Imen Gallali and Salem Hathroubi
Risks 2025, 13(6), 110; https://doi.org/10.3390/risks13060110 - 5 Jun 2025
Viewed by 418
Abstract
This paper examines the extent of stock-returns’ co-movements among firms in different countries and explores how various measures of closeness affect those co-movements by estimating a spatial autoregressive (SAR) convex combination model that merges four weight matrices—geographical distance, bilateral trade, sector similarity, and [...] Read more.
This paper examines the extent of stock-returns’ co-movements among firms in different countries and explores how various measures of closeness affect those co-movements by estimating a spatial autoregressive (SAR) convex combination model that merges four weight matrices—geographical distance, bilateral trade, sector similarity, and company size—into one global matrix. Our results reveal strong spatial stock-market dependence, show that spatial proximity is better captured by financial-distance measures than by pure geographical distance, and indicate that the weight matrix based on sector similarities outperforms the other linkages in explaining firms’ co-movements. Extending the traditional SAR model, the study simultaneously evaluated cross-country and within-country dependencies, providing insights valuable to investors building optimal portfolios and to policymakers monitoring contagion and systemic risk. Full article
15 pages, 422 KiB  
Article
Impacts of Financial Inclusion and Life Insurance Products on Poverty in Sub-Saharan African (SSA) Countries
by Oladotun Larry Anifowose and Bibi Zaheenah Chummun
Risks 2025, 13(6), 109; https://doi.org/10.3390/risks13060109 - 4 Jun 2025
Viewed by 447
Abstract
In recent years, scholars have been paying more attention to financial inclusion, which has been positioned as a crucial component in accomplishing the majority of the seventeen Sustainable Development Goals set forward by the United Nations. Investigating the effects of life insurance and [...] Read more.
In recent years, scholars have been paying more attention to financial inclusion, which has been positioned as a crucial component in accomplishing the majority of the seventeen Sustainable Development Goals set forward by the United Nations. Investigating the effects of life insurance and financial inclusion on poverty in 45 Sub-Saharan African (SSA) nations between 1999 and 2023 is the goal of this study. Using the Panel Autoregressive Distributed Lag (P-ARDL) method, this study concludes that poverty can be decreased through financial inclusion. Notably, we found that life insurance raises poverty when financial inclusion follows. This might be because there are not many microinsurance options available in SSA nations for those with low incomes. Due to their increased likelihood of being financially illiterate and their inability to purchase the necessary smart devices and internet services, the lower-income segments are unable to enjoy the same advantages as the higher-income segments. According to the findings, financial exclusion problems may be resolved by future life insurance, but this must be done in a sustainable manner. Future life insurance should address the requirements of the underprivileged and lower-income groups, and financial inclusion should be progressively enhanced. Full article
►▼ Show Figures

Figure 1

42 pages, 4414 KiB  
Article
Building an InsurTech Ecosystem Within the Insurance Industry
by Iván Sosa and Sergio Sosa
Risks 2025, 13(6), 108; https://doi.org/10.3390/risks13060108 - 3 Jun 2025
Viewed by 726
Abstract
The emergence of InsurTech has significantly transformed the traditional insurance industry, leading to the development of a new ecosystem characterized by digital intermediation, strategic partnerships, and increasing interdependence among actors. This paper investigates the structural configuration of the InsurTech ecosystem, emphasizing its role [...] Read more.
The emergence of InsurTech has significantly transformed the traditional insurance industry, leading to the development of a new ecosystem characterized by digital intermediation, strategic partnerships, and increasing interdependence among actors. This paper investigates the structural configuration of the InsurTech ecosystem, emphasizing its role in reshaping how value is created, delivered, and captured across the industry. Based on a sample of 364 active InsurTech firms from 2020 to 2023, the research employs network analysis to map the interactions and co-occurrences among seven defined archetypes: Enablers, Innovators, Connectors, Integrators, Protectors, Transformers, and Disruptors. The findings reveal a trend toward higher density and functional complementarity among archetypes by providing a framework for understanding the dynamics of the InsurTech ecosystem and the strategic implications. Building on these findings, this paper introduces a novel five-phase framework for understanding the ecosystem’s evolution: (1) digitalization and technologies, (2) customer-centric approach, (3) data and analytics, (4) platform-based business models, and (5) ecosystem partnerships. This research advances the theoretical understanding of InsurTech as a networked system of role-based interdependencies and provides a methodological approach to analyzing this scenario through network theory. Furthermore, it contributes to academic discourse and industry practice, offering practical guidance for insurers, startups, and policymakers by enabling actionable insights into the strategic positioning of InsurTech archetypes within the evolving insurance industry landscape. Full article
►▼ Show Figures

Figure 1

28 pages, 4030 KiB  
Article
Linking Futures and Options Pricing in the Natural Gas Market
by Francesco Rotondi
Risks 2025, 13(6), 107; https://doi.org/10.3390/risks13060107 - 3 Jun 2025
Viewed by 720
Abstract
A robust model for natural gas prices should simultaneously capture the observed prices of both futures and options. While incorporating a seasonal factor in the convenience yield of the spot price effectively replicates forward curves, it proves insufficient for accurately modelling the options [...] Read more.
A robust model for natural gas prices should simultaneously capture the observed prices of both futures and options. While incorporating a seasonal factor in the convenience yield of the spot price effectively replicates forward curves, it proves insufficient for accurately modelling the options price surface. The latter is more sensitive to the volatility structure of the spot price process, which has a limited impact on futures pricing. In this paper, we analyse European natural gas spot, futures, and options prices throughout 2024 and propose a no-arbitrage model that integrates both a seasonal stochastic convenience yield and a local volatility factor. This framework enables a simultaneous and accurate fit of both forward curves and options prices. Full article
(This article belongs to the Special Issue Financial Derivatives and Hedging in Energy Markets)
►▼ Show Figures

Figure 1

22 pages, 609 KiB  
Article
The Impact of Fintech on the Stability of Middle Eastern and North African (MENA) Banks
by Aisha Mohammad Afzal, Bashar Abu Khalaf, Maryam Saad Al-Naimi and Enas Samara
Risks 2025, 13(6), 106; https://doi.org/10.3390/risks13060106 - 29 May 2025
Cited by 1 | Viewed by 935
Abstract
This study investigates the impact of financial technology (Fintech) on bank stability in the Middle East and North Africa (MENA). Utilizing panel data from 94 banks in 10 countries over a 13-year period from 2011 to 2023, this research employs panel GMM regression [...] Read more.
This study investigates the impact of financial technology (Fintech) on bank stability in the Middle East and North Africa (MENA). Utilizing panel data from 94 banks in 10 countries over a 13-year period from 2011 to 2023, this research employs panel GMM regression to examine the relationship between the level of Fintech adoption, as measured by the Fintech index, and a bank’s stability. This paper controls for bank characteristics (efficiency, profitability, size, liquidity risk, and dividend payout ratio) and macroeconomic variables (GDP growth and inflation). The Fintech index is calculated using data text mining from the banks’ annual reports. This research contributes to the existing literature by providing empirical evidence of the positive effects of Fintech adoption in the MENA banking sector. The positive findings underscore the transformative impact of Fintech on banking stability, highlighting the importance of technological integration in MENA’s financial institutions for growth, stability, and effective strategies. The robustness of the results regression confirmed that our findings hold. Full article
►▼ Show Figures

Figure 1

27 pages, 1061 KiB  
Article
Assessing the Integrated Role of IT Governance, Fintech, and Blockchain in Enhancing Sustainability Performance and Mitigating Organizational Risk
by Faozi A. Almaqtari, Ali Thabit Yahya, Nahad Al-Maskari, Najib H. S. Farhan and Al-Muaayad Yaqoob Yahya Al-Aamri
Risks 2025, 13(6), 105; https://doi.org/10.3390/risks13060105 - 29 May 2025
Viewed by 868
Abstract
In a digitalized business, blockchain technology, fintech, AI, and IT governance are crucial for reducing risks and aligning with organizational goals. IT governance ensures smooth and efficient adoption of fintech solutions and AI. Blockchain introduces trust and security through smart contracts, enhancing sustainability [...] Read more.
In a digitalized business, blockchain technology, fintech, AI, and IT governance are crucial for reducing risks and aligning with organizational goals. IT governance ensures smooth and efficient adoption of fintech solutions and AI. Blockchain introduces trust and security through smart contracts, enhancing sustainability performance. Thus, in today’s rapidly evolving digital environment, the integration of these technologies has become critical to organizational resilience in the long-term. The present study aims to explore how the integrated role of IT governance, fintech, and blockchain technologies can enhance sustainability practices to mitigate organizational risks. The study utilized a questionnaire survey to assess the impact of IT governance, fintech, and blockchain technologies on sustainability performance in Oman. The sample included commercial, industrial, and service companies, including banks. A non-probability sampling approach, including convenience and snowball sampling, was used. Software tools such as SPSS and Smart PLS were used to estimate quantitative data analysis and structural modeling results. The study concludes that IT governance dimensions alone have an insignificant impact on sustainability. Importantly, the integrated effect of IT governance (alignment, policies, and committees) improves sustainability. The results also report that IT governance significantly enhances fintech adoption, but it has an insignificant influence on blockchain adoption in organizations. The results reveal that the respondents perceive that sustainability is positively and significantly improved by IT governance strategic alignment and the steering committee. The study offers a unique perspective on the impact of blockchain, IT governance, and fintech technologies on sustainability, filling existing literature gaps and urging policymakers to achieve the Omani Vision 2040. Full article
►▼ Show Figures

Figure 1

23 pages, 434 KiB  
Article
A Deep Dive into Institutional and Economic Influences on Poverty in Europe
by Dorin Jula, Lavinia Mastac, Diane Paula Corina Vancea and Kamer-Ainur Aivaz
Risks 2025, 13(6), 104; https://doi.org/10.3390/risks13060104 - 28 May 2025
Cited by 1 | Viewed by 567
Abstract
This study analyzed the evolution of the poverty rate between 2004 and 2023 in 29 European countries, using two categories of variables: institutional variables (Corruption Control Index and Rule of Law Index) and economic variables (unemployment rate, shadow economy, government expenditures on social [...] Read more.
This study analyzed the evolution of the poverty rate between 2004 and 2023 in 29 European countries, using two categories of variables: institutional variables (Corruption Control Index and Rule of Law Index) and economic variables (unemployment rate, shadow economy, government expenditures on social protection and the Gini index). The methodology adopted included dynamic panel econometric models, applying a technique which involves the elimination of individual effects by a primary differencing of the variables and the use of the generalized method of moments (GMM) to evaluate the estimators. This methodology eliminates endogeneity caused by including the dependent variable with lag among the explanatory variables in the model. The results showed a strong negative correlation between the poverty rate and institutional variables, suggesting that improvements in governance and access to education and health resources are essential for poverty reduction. The shadow economy has also been identified as a poverty buffer, providing support in the absence of formal employment opportunities. The short-term impact of government expenditures on social protection was not significant, indicating the need for further analysis to better understand these dynamics. This research can make a significant contribution to the design of more effective public policies aimed at reducing shocks, reducing inequality and promoting sustainable economic growth. Full article
(This article belongs to the Special Issue Risk Analysis in Financial Crisis and Stock Market)
17 pages, 18004 KiB  
Article
Implicit Prioritization of Life Insurance Coverage: A Study of Policyholder Preferences in a Danish Pension Company
by Julie Bjørner Søe
Risks 2025, 13(6), 103; https://doi.org/10.3390/risks13060103 - 26 May 2025
Viewed by 437
Abstract
This study evaluates the utility derived by policyholders in a Danish pension company, from their life insurance coverages. We quantify the relative importance policyholders assign to their existing coverages versus a hypothetical complete coverage scenario, thereby measuring the implicit priority of their current [...] Read more.
This study evaluates the utility derived by policyholders in a Danish pension company, from their life insurance coverages. We quantify the relative importance policyholders assign to their existing coverages versus a hypothetical complete coverage scenario, thereby measuring the implicit priority of their current coverage. By analyzing these implicit priorities based on individual attributes such as age, financial situation, and company agreement limitations, we gain a comprehensive understanding of policyholders’ evaluations of their current life insurance coverage. Utilizing a continuous-time life cycle model, we optimize consumption and life insurance decisions during the accumulation phase, applying well-established theoretical findings to actual data. Our analysis identifies trends, outliers, and insights that can inform potential improvements in life insurance coverage. This tool aims to assist policyholders in prioritizing their coverage according to their life situations and provides a foundation for advisory dialogues and product development. Full article
(This article belongs to the Special Issue Market-Consistent Actuarial Valuation and Risk-Based Capital Assessment)
►▼ Show Figures

Figure 1

20 pages, 495 KiB  
Article
The Use of the Fraud Pentagon Model in Assessing the Risk of Fraudulent Financial Reporting
by Georgiana Burlacu, Ioan-Bogdan Robu, Ion Anghel, Marius Eugen Rogoz and Ionela Munteanu
Risks 2025, 13(6), 102; https://doi.org/10.3390/risks13060102 - 22 May 2025
Viewed by 1645
Abstract
This study examines the relevance of the Fraud Pentagon Theory in detecting fraudulent financial reporting among companies listed on the Bucharest Stock Exchange. While financial reporting is essential for informed stakeholder decisions, requiring information to be accurate, reliable, and fairly presented and pressure [...] Read more.
This study examines the relevance of the Fraud Pentagon Theory in detecting fraudulent financial reporting among companies listed on the Bucharest Stock Exchange. While financial reporting is essential for informed stakeholder decisions, requiring information to be accurate, reliable, and fairly presented and pressure to meet expectations can lead to manipulation. The Fraud Pentagon Theory identifies five potential drivers of such behavior: pressure, opportunity, rationalization, capability, and arrogance. This research contributes to the literature by empirically testing the theory in the Romanian context, an emerging market with limited prior analysis, using a sample of 62 listed companies over the 2017–2021 period. Regression analysis was applied, using the Dechow F-score, which combines accrual quality and financial performance to assess the likelihood of fraudulent financial reporting. The findings reveal that not all dimensions of the theory significantly affect the likelihood of fraudulent reporting. Specifically, pressure-related factors (financial performance and financial stability) were found to be statistically significant, while external pressure, opportunity (external auditor quality and nature of industry), rationalization (change of auditor), capability (change of director), and arrogance (number of CEO’s pictures) did not show significant influence in the Romanian framework. These results highlight the importance of contextual factors such as market structure, governance practices, and stakeholder expectations, suggesting that fraudulent reporting risk indicators may vary across different economic environments. Full article
(This article belongs to the Special Issue Risk Analysis in Financial Crisis and Stock Market)
►▼ Show Figures

Figure 1

21 pages, 502 KiB  
Article
Natural Resource Rent and Bank Stability in the MENA Region: Does Institutional Quality Matter?
by Abdelaziz Hakimi, Hichem Saidi and Mohamed Ali Khemiri
Risks 2025, 13(6), 101; https://doi.org/10.3390/risks13060101 - 22 May 2025
Viewed by 443
Abstract
In natural resource-dependent economies, global resource price volatility makes financial systems more vulnerable to economic shocks. The relationship between natural resource rent and bank stability lies in how fluctuations in resource revenues can affect financial institutions’ stability. The purpose of this paper is [...] Read more.
In natural resource-dependent economies, global resource price volatility makes financial systems more vulnerable to economic shocks. The relationship between natural resource rent and bank stability lies in how fluctuations in resource revenues can affect financial institutions’ stability. The purpose of this paper is twofold. First, it explores the effect of natural resource rent (NRR) on bank stability (BS) in the Middle East and North Africa (MENA) region. Second, it examines whether institutional quality (IQ) moderates the association between BS and NRR. To achieve these goals, we used a sample of 68 conventional banks located in the MENA region between 2005 and 2020 and performed the System Generalized Method of Moments (SGMM) as an econometric approach. The empirical findings show that NRR is negatively and significantly associated with BS, while IQ significantly enhances BS in the MENA region. Additionally, the outcomes support evidence that the MENA banks benefit from an interaction between IQ and NRR. This result was confirmed for both the Z-ROA and Z-ROE as measures of BS. The results of this paper could have several useful applications for policymakers and bankers. Policymakers should prioritize strengthening institutional frameworks to mitigate the adverse effects of resource dependence on financial stability. In addition, bankers are invited to focus on improving institutional quality by fostering an institutional environment, including compliance with anti-corruption standards and coordination with regulatory bodies to boost financial resilience. Full article
►▼ Show Figures

Figure 1

19 pages, 1734 KiB  
Article
Modeling Age-to-Age Development Factors in Auto Insurance Through Principal Component Analysis and Temporal Clustering
by Shengkun Xie and Chong Gan
Risks 2025, 13(6), 100; https://doi.org/10.3390/risks13060100 - 22 May 2025
Viewed by 411
Abstract
The estimation of age-to-age development factors is fundamental to loss reserving, with direct implications for risk management and regulatory compliance in the auto insurance sector. The precise and robust estimation of these factors underpins the credibility of case reserves and the effective management [...] Read more.
The estimation of age-to-age development factors is fundamental to loss reserving, with direct implications for risk management and regulatory compliance in the auto insurance sector. The precise and robust estimation of these factors underpins the credibility of case reserves and the effective management of future claim liabilities. This study investigates the underlying structure and sources of variability in development factor estimates by applying multivariate statistical techniques to the analysis of development triangles. Departing from conventional univariate summaries (e.g., mean or median), we introduce a comprehensive framework that incorporates temporal clustering of development factors and addresses associated modeling complexities, including high dimensionality and temporal dependency. The proposed methodology enhances interpretability and captures latent structures in the data, thereby improving the reliability of reserve estimates. Our findings contribute to the advancement of reserving practices by offering a more nuanced understanding of development factor behavior under uncertainty. Full article
►▼ Show Figures

Figure 1

Show export options expand_more Show export options expand_less
Select all
Export citation of selected articles as:
 
Displaying articles 1-18
Previous Issue
Next Issue
Back to TopTop