Humboldt-Universität zu Berlin >> School of Business and Economics

About the SFB
Project A
Project B
Project C
Project INF
Project T
Deutsche Forschungsgemeinschaft
Supported by Deutsche Forschungsgemeinschaft

::: Project area A: Individual and contractual answers to risks

A6 Strategic risk in experimental games Prof. Dr. Radosveta Ivanova-Stenzel
Prof. Dr. Dorothea Kübler
A8 The Dynamics of Regulatory Risk Prof. Dr. Roland Strausz Homepage
A9 The Local Incidence of Shocks - The Role of Labor Supply Prof. Dr. Alexandra Spitz-Oener Homepage
A11 Securitization and Equilibrium Risk Transfer Prof. Dr. Ulrich Horst Homepage
A12 Contextual Influences on Risk Perception in Investment Decisions Prof. Dr. Hauke Heekeren Homepage
A13 Risk Allocation with Derivatives by Corporations Prof. Dr. Tim Adam Homepage
A15 Risk-Sharing within Firms Prof. Alex Stomper, Ph.D. Homepage

Dimensions of risk

The projects in column A deal exclusively with the microeconomic and decision theoretical dimension of risk. The question is therefore always how individuals perceive risks, how individual decisions are influenced by risk or uncertainty and how the avoidance of risk in investment decisions afflict the form of contracts and the market dynamics. Between the projects are a variety of methodical and content overlaps and linkages.

Modeling of risk

All projects are based on a, for the respective question, relevant stochastic modelling of risk e.g. by acceptance of appropriate stochastic processes (A3) or more sensibly parameterization of technical or economical uncertainty (A1, A4). In many cases is uncertainty is first produced particularly if an appropriate contractual safeguard of reciprocal behaviour expectation is not possible. Demougin (A4) and Maug (A1) examine the problems, that can emerge through the after negotiation of contracts and ask the question, in how far can individual strategies provide a safeguard against such renegotiations, e.g. through creation of reputation in repeated games (A4). In this regard is also the analysis of strategic uncertainty and the correct assessment of the strategy of the opponent especially important, this will be examined by Kübler (A6). Additional uncertainty emerges also with the existence of over exogenous factors out of uncertainty regarding the correct model (A3).

Assessment of risk

A central requirement of all projects is the modeling of individual preferences as how individuals evaluate risk is central for the question. Such an evaluation permits in turn the prognosis of behaviour under uncertainty. This stands very much in the project from Schied (A3) in the foreground that not only examines uncertainty but also insecurity about the correct model and the resultant consequences for individual investment strategies . The correct modeling of individual preferences plays with management compensation contracts (A1, A4) an equally important role as the valuation of the business risk can vary strongly between individual managers, depending on the supposed function.

Consequences of risk

The projects group A analyze, on the basis of the named modelling strategies, the consequences of risk perception and risk avoidance with the structuring of contracts and the design of institutions. Compensation contracts for managers reflect the appreciation of values of stimulus and the costs through additional risk premiums (A1, A4). These contracts distribute the risks explicitly between the contracted parties. This is not however in some situations possible as contracts are inevitably incomplete, so that implicit contracts can only be supported by reputation in equilibrium (A4, A6).

Dynamic modeling of preferences

A project that highlights the dynamic modeling of risk (A3). Here new contributions towards dynamic modelling will be made. Whereas static models have in practice prevailed extensively (e.g. value at risk), the area of dynamic modelling is less developed, contributions from Scheid about regarding additive expectation values (A3) will cover uncharted territory.


::: Projects finished

A1 Risk and design of Management-Compensation contracts (finished) Prof. Dr. Ernst Maug Homepage
A3 Optimization of dynamic consumption streams under uncertainty (finished) Prof. Dr. Alexander Schied Homepage
A4 Optimal allocation of risks in organizations (finished) Prof. Dominique Demougin, Ph.D. Homepage
A7 Accounting and Cost of Capital (finished) Prof. Dr. Joachim Gassen Homepage
A14 Statistical inference methods for assessing the genetic basis of risk preferences Prof. Dr. Thorsten Dickhaus Homepage

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