Sovereign risk management: A rationalist explanation of Putin’s and Trump’s risk taking behavior and its consequences
Open Access
- 15 November 2017
- journal article
- Published by Virtus Interpress in Corporate Governance and Sustainability Review
- Vol. 1 (2), 6-16
- https://doi.org/10.22495/cgsrv1i2p1
Abstract
It goes without saying that nowadays corporate leaders should perform their activity within the concept of sustainable development. The United Nations detail on their homepage (sustainabledevelopment.un.org) what this means. But corporate leaders sometimes face headwind from their governments. Therefore it is important to understand the reasons for such governmental decision making. Two prominent cases are the presidents of the USA and Russia. Firstly, two seemingly unrelated topics of Russian politics are investigated. It is shown that under expected utility maximization the assumptions of an unbiased oil forward market and a risk-acceptant attitude (strictly convex utility function) of president Putin are sufficient to explain Russia’s open position in oil and the bailout of Rosneft. Secondly, actions of president Trump are considered. Again, a risk-acceptant attitude is able to explain his campaign and to conform with his statements. Thirdly, international negotiations over Ukraine between two risk-acceptant presidents are considered. It is proven that the chances for a negotiated settlement have shrunken with the election of Trump and might now even be nil. Fourthly, a tentative outlook on international economics (trade war), finance (regulation) and politics (climate action) is performed.Keywords
This publication has 16 references indexed in Scilit:
- What do we learn from the price of crude oil futures?Journal of Applied Econometrics, 2010
- ‘An enemy at the gates’ or ‘from victory to victory’? Russian foreign policyInternational Affairs, 2008
- Chapter 22 Economics of Conflict: An OverviewPublished by Elsevier BV ,2007
- War as a Commitment ProblemInternational Organization, 2006
- Chapter 7 Theorizing about conflictPublished by Elsevier BV ,1995
- Rationalist explanations for warInternational Organization, 1995
- LeverageThe Journal of Finance, 1991
- Contrasting Rational and Psychological Analyses of Political ChoiceAmerican Political Science Review, 1988
- An Expected Utility Theory of International ConflictAmerican Political Science Review, 1980
- Prospect Theory: An Analysis of Decision under RiskEconometrica, 1979