PhD Projects

This ETH Risk Center cluster project brings together the interdisciplinary competences of three professorships from ETH (two of them from the Risk Center) towards one common goal: Enabling real-time, dynamic earthquake risk assessment. The project’s aim is a paradigm shift in the way earthquake information is collected, processed, analyzed, distributed and used. It is most urgently needed and technically realistic. The project considers earthquake hazard, and hence risk as time evolving, integrated and systemic, forming a dynamic risk 'landscape'. This project is leveraged by the Swiss Risk Map Project, where the RC is part of the Financial Module. The Risk Center also is involved in a current EU Grant Proposal.

The goal of this project is to investigate how today's monetary architectures and potential alternatives function and/or should be regulated, as well as how a digital currency issued by the central bank—which will be called “central bank digital currency”—could be best implemented into current and alternative monetary architectures.

More specifically, the project will first compare the performance of our current monetary architecture with alternative architectures. Second, it will determine technical feasibility criteria and methods for the governance of a central bank digital currency. This will allow to compare the benefits and drawbacks of such a currency. Finally, the project will combine and extend the previous results to investigate the performance of different monetary architectures that integrate a central bank digital currency.

Co-Voting is a new decision-making procedure that combines advantages of representative and direct democracies. We suggest to combine votes from the elected members of the Parliament and a randomly chosen sample of the citizenry. Such an approach is less costly and decisions are less delayed then in a direct democracy. Additionally, the citizenry is not overruled. We propose that the voting process is done electronically, which reduces costs and allows for more flexibility. We analyze the strategic implications of Co-Voting--in all its variants--for politicians, parties and citizens and determine its performance. This requires mathematical modeling, as is customary in economics (in particular, in political economy). Moreover, we examine what implications an electronic voting approach has with respect to the security of a Co-voting process. This requires a precise formal definition of a voting protocol, its desired security properties and proofs that these properties hold.

This project aims at improving the risk-management and risk sharing of longevity risk through annuity pensions under dependent mortality and interest rates. It will develop quantitative methods with applications in real-world situations. We take an integrative risk-management approach, treating both risks in a unified framework and allowing for an evaluation of the social benefit of risk sharing, offering innovative annuity products that may increase social welfare.

Financial markets in energy and electricity are characterized by highly specialized contracts that often run over long time horizons, with maturities up to 15 years not uncommon. Positions involving such products are exposed to a wide range of risks driven by a large set of risk factors. Market risk, credit risk, and liquidity risk are important examples. Hedging these risks is an important and difficult challenge, since suitable hedging instruments are scarce, and to the extent they exist, they often have limited liquidity. As a result, markets are both highly incomplete and illiquid, leading to a heavy reliance on models for pricing, hedging, and risk management purposes. This results in a significant exposure to model risk, especially over long time horizons. This PhD project aims to address these and related issues using recent advances in a number of areas in finance and mathematics, for example: Tractable multi-factor stochastic models, at present primarily employed in the context of fixed income, credit, and equity markets; Analysis of long term risk, such as the impact of risk factors on valuation and hedging over long time horizons; Model uncertainty, such as robustness of hedges with respect to model misspecification.

Work Package 1 tries to identify the underlying mechanisms of systemic risk. This requires to develop tools that detect precursors of systemic risk and, in turn, to explore measures to improve system resilience. Specifically, in a general modeling approach - or a framework - this project wants to consider different layers and their specific contribution to the emergence of systemic risk.  

Work Package 2 tries to improve our understanding of the emergence and the spread of financial crisis and explore novel, cost-effective, more robust institutional arrangements that consider decision biases of agents. In this project we design macroprudential rules that are robust and able to dampen small or medium-size aggregate shocks such that functions and structures of the financial system will continue to fulfill requirements.

Work Package 3 explores interdependencies between macro-systems, particularly resource extraction, energy production, and political stability, to improve our understanding of cross-system links. The project identifies the conditions under which limited state capacity and large-scale resource extraction are likely to trigger political instability in general, and intrastate conflict in particular.