Sovereign Risk Management: A Rationalist Explanation of Putin's and Trump's Risk Taking Behavior and Its Consequences

Corporate Governance and Sustainability Review, 1(2), 2017, 6-16

19 Pages Posted: 1 Mar 2017 Last revised: 20 Nov 2017

See all articles by Frank Lehrbass

Frank Lehrbass

L*PARC (Lehrbass Predicitive Analytics and Risk Consulting); FOM University of Applied Sciences for Economics and Management; University of the Bundesbank

Date Written: February 28, 2017

Abstract

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 haven shrunken with the election of Trump and might now even be nil. Fourthly, a tentative outlook on international economics and finance is performed.

Keywords: Putin, Trump, sovereign risk management, conflict in Ukraine, trade war

JEL Classification: C00, D7, F5, G18, G38, H1, H3, H7, N4

Suggested Citation

Lehrbass, Frank, Sovereign Risk Management: A Rationalist Explanation of Putin's and Trump's Risk Taking Behavior and Its Consequences (February 28, 2017). Corporate Governance and Sustainability Review, 1(2), 2017, 6-16. Available at SSRN: https://ssrn.com/abstract=2925237 or http://dx.doi.org/10.2139/ssrn.2925237

Frank Lehrbass (Contact Author)

L*PARC (Lehrbass Predicitive Analytics and Risk Consulting) ( email )

Dusseldorf
Germany

HOME PAGE: http://lehrbass.de

FOM University of Applied Sciences for Economics and Management ( email )

Toulouser Allee 53
Dusseldorf, 40476
Germany

University of the Bundesbank ( email )

Schloss
Hachenburg, 57627
Germany

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