Risk, Return and Credit

This dissertation investigates the role of credit in the evaluation of risk and return. The research comprises three essays, which analyze the use of credit from different perspectives. Chapter 1: The first essay proposes a comprehensive theory for the assessment and implementation of "acceptable" underwriting and rating variables. While the use of personal credit was the driving force behind the essay, we extend our theory and models to include all controversial rating classifications. It is shown that a rating classification would be appropriate when the cost to society is relatively small. The use of personal credit in the automobile insurance industry is provided as an application of the proposed models, and other considerations are explored. Chapter 2: For many years, gamblers have developed strategies to reach specific monetary and survival goals. In the second essay, a strategy is introduced in which a speculator engages in bet doubling to increase his chances of walking home a winner. It is shown that with enough credit it is quite possible to become a winner with a high degree of certainty--99.9%, even while facing a losing proposition. However, huge returns require huge risks, and so adopting such a strategy would eventually lead to large losses and negative expected profits. It is also shown that limited liability and a cost of obtaining credit are important factors to consider when analyzing expected gains. Chapter 3: "Hazardously immoral" contracts force external parties to bear significant losses without their consent. Abuses are particularly likely to occur when the threat of system-wide disruption is sufficient to make governments and international agencies bail out the offending organizations in order to limit total damages. The models provided in chapter 2 are presented in the third essay as strategies for externalizing extreme risks, and several results are derived.

Grantor dc:publisher

Temple University. Libraries

Year dc:date.issued

2010

Author dc:creator

• Chapman, Zaneta Anne

Advisor dc:contributor.advisor

• Powers, Michael R.

Committee members dc:contributor.committeemember

• Getzen, Thomas E.
• Viswanathan, Krupa S.
• Smith, Woollcott, 1941-
• Yang, Wei-shih, 1954-

• Business Administration, General

Statement dc:rights

• IN COPYRIGHT- This Rights Statement can be used for an Item that is in copyright. Using this statement implies that the organization making this Item available has determined that the Item is in copyright and either is the rights-holder, has obtained permission from the rights-holder(s) to make their Work(s) available, or makes the Item available under an exception or limitation to copyright (including Fair Use) that entitles it to make the Item available.

Licence dc:rights.uri

• http://rightsstatements.org/vocab/InC/1.0/

Language dc:language.iso

eng

Dc Identifier Other

864884957

OAI identifier oai:identifier

oai:scholarshare.temple.edu:20.500.12613/943