Daniel K Dimitrov

👋 Welcome to my personal page. I’m a financial researcher and risk manager at De Nederlandsche Bank’s Financial Markets division. My research covers areas in macro-finance, asset pricing, financial stability, and risk management. I also teach part-time at the University of Amsterdam.

📧 You can reach me at daniel.k.dimitrov@gmail.com.

This page shares my ongoing research projects. The views expressed here do not necessarily correspond to those of the central bank.

Book Chapters

• Central Bank Capital and Shareholder Relationship (with M. Bonetti, D. Broeders, D. Chen). Forthcoming in Central Bank Capital in Turbulent Times View Paper

📝 Working Papers (2023-24)

• Macroprudential Regulation: A Risk Management Approach (with Sweder van Wijnbergen). View Paper, Code
• Quantifying Systemic Risk in the Presence of Unlisted Banks: Application to the European Banking Sector (with Sweder van Wijnbergen). View Paper, Slides
• Intergenerational Risk Sharing with Market Liquidity Risk (with Sweder van Wijnbergen). View Paper, Slides
• Quantifying Systemic Risk in the Presence of Unlisted Banks: Application to the Dutch Financial Sector. View Paper, Slides

🚀 Ongoing Projects

• Climate-Linked Bonds (w/ D. Broeders and N. Verhoeven)

  We argue that climate-linked bonds issued by governments or supranational organisations are critical for transitioning to a net-zero economy. These bonds adjust their pay-off based on climate-related variables such as average land temperature, greenhouse gas concentrations, or water levels. This adjustment mechanism provides investors with an opportunity to hedge against long-term climate risks, while signaling government commitment to early-stage climate action and incentivizing robust climate policies. Furthermore, the price differential between climate-linked and nominal bonds offers insights into market expectations regarding climate risks. In this paper, we propose the concept of climate-linked bonds and present a rationale for their issuance by governments. To support this, we introduce a novel model of climate hedging, outlining the factors affecting supply and demand for climate hedges, and justify the creation of these bonds.

• Strategic Asset Allocation with Private Assets: Untangling Illiquidity. [Draft available upon request]

  This paper addresses the asset allocation problem of long-term investors with exposures to illiquid private asset classes (hedge funds, private equity, real estate, infrastructure, etc.). A dynamic portfolio choice model captures the temporal nature of illiquidity, where trading uncertainty hinders the investor from freely adjusting their allocations to the strategic targets. Calibrating the optimization model to analyst-based market expectations, and weighing up the risks of illiquidity against the premia and diversification potential associated with private asset classes, I quantify the welfare impact of illiquidity in investors’ asset mix.

🎓 Ph.D. Thesis

A graduate from the University of Amsterdam, supervised by Prof. Roel Beetsma and Prof. Sweder van Wijnbergen. My Ph.D. thesis, “Three essays on the optimal allocation of risk”, discusses asset allocation, illiquidity, intergenerational risk sharing, and systemic risk for financial institutions.