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Open Access Publications from the University of California

About

The Center for Risk Management Research was established on July 1, 2013 as the successor to the Coleman Fung Risk Management Research Center. We are grateful for the generous support of Coleman Fung, founder of Open Link Financial, Inc. over the period 2007-2013, which permitted the establishment of the Center.

The Center focuses on the management of risk within the context of financial markets, including equity, commodity and fixed income markets, and derivatives on those markets. The Center's goal is to address the most important and pressing issues in risk management and portfolio management. This means fostering outstanding research, drawing on the best ideas and practices from the academic and practitioner communities, and collaborating with top individuals from both backgrounds. Research at the Center will be an interdisciplinary effort involving graduate students and researchers from a broad array of disciplines, including economics, statistics, finance, engineering, computer science and mathematics. It will seek to publish in the leading academic and practitioner journals, and to elevate the practice of risk management.

Center for Risk Management Research

There are 55 publications in this collection, published between 2006 and 2013.
Coleman Fung Risk Management Research Center Working Papers 2006-2013 (52)

Interest Rate Conundrum

In June of 2004 the Fed began relentlessly tightening policy. They raised the Federal Funds Target (Target) from 1% to 5 1/4% in 1/4% increments at seventeen consecutive meetings. While short rates dutifully followed the Target up, long maturity rates actually fell. Alan Greenspan in 2005 Congressional testimony labeled the strange behavior of the spread between long rates and the Target a “conundrum”. This paper examines the conundrum. We present robust empirical evidence that the increase in foreign holdings of US Treasury bonds explains at least half of the decline in long maturity rates. Foreign holdings of US Treasury debt with a maturity over one year grew from 20% in 1994 to 57% in 2007.

Equity Risk Premium and Insecure Property Rights

How much of the equity risk premium puzzle can be attributed to the insecure property rights of shareholders? This paper develops a version of the CCAPM with insecure property rights. The model implies that the current expected equity premium can be reconciled with a coefficient of risk aversion of 3.76, thus resolving the equity premium puzzle.

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Center for Risk Management Research Working Papers (2)