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Globalization, Gating, and Risk Finance
book

Globalization, Gating, and Risk Finance

by Unurjargal Nyambuu, Charles S. Tapiero
January 2018
Intermediate to advanced content levelIntermediate to advanced
496 pages
16h 43m
English
Wiley
Content preview from Globalization, Gating, and Risk Finance

10Compliance and Financial Regulation

Motivation

In this chapter we stress the increased complexity of both the regulatory environment and compliance risk in an increasingly global, gated, and strategic financial marketplace. In particular, markets are influenced by political concerns as well as by technology and information. In such an environment, compliance is both strategic and statistical. This chapter examines both aspects, highlighting regulatory risks and their controls. At the same time, we introduce relatively simple quantitative models to estimate compliance probabilities and their risks using audit games and strategic controls. The models we consider include (1) Bernoulli compliance models and their derivatives, (2) statistical compliance and statistical risks, (3) multivariate statistical approaches, and (4) regulation and compliance games.

10.1 Introduction

Globalization, gating, and regulation by multiple agencies, regulatory bodies, and sovereign entities have led to a regulatory maze with extreme economic consequences. These, in turn, have led to a systemic transformation of financial institutions at both national and international levels, challenging globalization, and forcing firms and investors everywhere to be compliant with a plethora of complex requirements and certifying organizations (Kim and Santomero, 1994 ; Alexander et al., 1996 ; Barth et al., 2001, 2004, 2008 ; Ai and Sappington, 2002 ; Roubini, 2008 ; Macey, 2013 ; C.S. Tapiero, 2013a, b). ...

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Publisher Resources

ISBN: 9781119252658Purchase book