Journal of Risk

This issue of The Journal of Risk contains four papers illustrating different approaches to modeling risk, depending on whether it is viewed from a single individual's perspective, whether it addresses the capital requirements of an insurance company or a commercial bank, or whether it concerns the downside of a sector-specific investment product.

In the first paper of this issue, "Real estate investment trust return dynamics and value-at-risk under alternative classes of model specifications", Jung-Suk Yu evaluates various ways to account for the features of non-Gaussian returns for the purposes of value-at-risk estimation, which continues to play a critical role in the debate surrounding the 2008 crisis. The author compares six model specifications (that fall into two broad classes: Poisson-based jump models and asymmetric fat-tail distributions) and finds that skewed t models outperform generalized autoregressive conditional heteroscedasticity (GARCH)-jump models.

The next paper, "Deriving the minimal amount of risk capital for property-liability insurance companies utilizing asset liability management" by Matthias Schmautz and Niklas Lampenius, presents an asset liability model to determine the risk capital of an insurance company. The authors develop an optimization model that derives the minimum risk capital for a given ruin probability. Their approach shows the advantage of using asset-liability management over pure asset management and highlights the importance of integrating the dependence between liabilities and the returns on assets.

In the third paper of the issue, "Public visibility and risk-related disclosures in Portuguese credit institutions", Jonas Oliveira, Lúcia Lima Rodrigues and Russell Craig use legitimacy theory and shareholder maximization to study what drives the riskrelated disclosures of credit institutions. They find that a higher level of risk-related disclosures is associated with greater public visibility, in contrast with other factors such as profit growth, listing status and accounting system. Their paper contains innovative ways of measuring risk-related disclosure and public visibility. It also provides an empirical validation of legitimacy theory.

The fourth and final paper in this issue, "An alternative explanation for the variation in reported estimates of risk aversion" by Denis Conniffe and Donal O'Neill, addresses a central empirical issue in neoclassical finance: namely, that of estimating the Arrow-Pratt measure of risk aversion. Estimates for this parameter vary widely and the authors focus on a popular estimation approach: that is, the mean-variance approximation. They show that violating conditions of its premise leads to significant overestimation and underestimation of the level of risk aversion.