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
Date Written: February 28, 2017
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: Suggested Citation