Risks

20 pages, 2552 KiB

Open AccessArticle

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

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)

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20 pages, 641 KiB

Open AccessArticle

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

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

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19 pages, 447 KiB

Open AccessArticle

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 165

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, 525 KiB

Open AccessArticle

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 207

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

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42 pages, 4414 KiB

Open AccessArticle

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 367

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

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28 pages, 4030 KiB

Open AccessFeature PaperArticle

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 280

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)

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22 pages, 609 KiB

Open AccessArticle

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

Viewed by 365

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

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27 pages, 1061 KiB

Open AccessArticle

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 417

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

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23 pages, 434 KiB

Open AccessArticle

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

Viewed by 311

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

Open AccessArticle

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 175

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)

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20 pages, 495 KiB

Open AccessArticle

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 808

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)

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21 pages, 502 KiB

Open AccessArticle

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 270

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

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19 pages, 1734 KiB

Open AccessArticle

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 253

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

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

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