Author: Sotiris K. StaikourasPublisher:
ISBN:
Category :
Languages : en
Pages :
Book Description
Interest Rate Volatility and the Risk of Financial Institutions
Author: Sotiris K. StaikourasInternational Convergence of Capital Measurement and Capital Standards
Author: Publisher: Lulu.com
ISBN: 9291316695
Category : Bank capital
Languages : en
Pages : 294
Book Description
Risk Management in Volatile Financial Markets
Author: Franco BruniPublisher: Springer Science & Business Media
ISBN: 146131271X
Category : Business & Economics
Languages : en
Pages : 374
Book Description
intense competition on banks and other financial institutions, as a period of oligopoly ends: more rather than less innovation is needed to help share undi versifiable risks, with more attention to correlations between different risks. Charles Goodhart of the London School of Economics (LSE), while ques tioning the idea that volatility has increased, concludes that structural changes have made regulation more problematic and calls for improved information availability on derivatives transactions. In a thirteen country case study of the bond market turbulence of 1994, Bo rio and McCauley of the BIS pin the primary causes of the market decline on the market's own dynamics rather than on variations in market participants' apprehensions about economic fundamentals. Colm Kearney of the Univer sity of Western Sydney, after a six country study of volatility in economic and financial variables, concludes that more international collaboration in man aging financial volatility (other than in foreign exchange markets) is needed in Europe. Finally, Stokman and Vlaar of the Dutch central bank investigate the empirical evidence for the interaction between volatility and international transactions in real and financial assets for the Netherlands, concluding that such influence depends on the chosen volatility measure. The authors sug gest that there are no strong arguments for international restrictions to reduce volatility. INSTITUTIONAL ISSUES AND PRACTICES The six papers in Part C focus on what market participants are doing to manage risk.
Interest Rate Volatility and the Size of the Financial Sector
Author: Gregory Alan KrohnPublisher:
ISBN:
Category : Interest rates
Languages : en
Pages : 280
Book Description
Interest Rate Modeling for Risk Management: Market Price of Interest Rate Risk (Second Edition)
Author: Takashi YasuokaPublisher: Bentham Science Publishers
ISBN: 1681086891
Category : Business & Economics
Languages : en
Pages : 325
Book Description
Interest Rate Modeling for Risk Management presents an economic model which can be used to compare interest rate and perform market risk assessment analyses. The key interest rate model applied in this book is specified under real-world measures, and the result is used as to generate scenarios for interest rates. The book introduces a theoretical framework that allows estimating the market price of interest rate risk. For this, the book starts with a brief explanation of stochastic analysis, and introduces interest rate models such as Heath-Jarrow-Morton, Hull-White and LIBOR models. The real-world model is then introduced in subsequent chapters. Additionally, the book also explains some properties of the real-world model, along with the negative price tendency of the market price for risk and a positive market price of risk (with practical examples). Readers will also find a handy appendix with proofs to complement the numerical methods explained in the book. This book is intended as a primer for practitioners in financial institutions involved in interest rate risk management. It also presents a new perspective for researchers and graduates in econometrics and finance on the study of interest rate models. The second edition features an expanded commentary on real world models as well as additional numerical examples for the benefit of readers.
Understanding Volatility and Liquidity in the Financial Markets
Author: Dimitris N. ChorafasPublisher: Euromoney Publications
ISBN:
Category : Business & Economics
Languages : en
Pages : 252
Book Description
This title is useful reading for anyone responsible for minimizing exposures and failures within their organization, as well as financial professionals working to produce models of risk and reward. It goes beyond the issues of volatility and liquidity, leading towards a system of risk management.
Interest Rate Swap. A vehicle to hedge against interest rate risk
Author: Patrick HaugPublisher: GRIN Verlag
ISBN: 3668653682
Category : Business & Economics
Languages : en
Pages : 23
Book Description
Seminar paper from the year 2016 in the subject Economics - Finance, grade: 1,3, University of Applied Sciences Essen, language: English, abstract: Every action involves risks. This applies to companies operating in the market and also in particular to credit institutions whose raison d'être lies in the assumption of risks. Risk in the literal sense is grounded in a lack of awareness of the possibility of negative deviation from planned corporate goals. To generate income and to be able to survive a company has to take risks. Such risks are different in nature and are therefore to be evaluated differently. Banks generate the majority of their income from interest-bearing business. Companies finance their borrowing requirements next to equity mainly through loans. With regards to borrowing costs it is to be noted that corporate risk also shows a dependency between total capital and interest on debt. This is known as the leverage effect which in a negative scenario may be so large that the resulting losses can no longer be compensated. The change in economic conditions, fluctuations of interest rates (IR) and exchange rates on the capital markets especially due to inflation at the beginning of the 70s and 80s were the trigger for the development of new financial instruments (see Appendix, Figures 7, 8 and 9). The financial industry constantly creates new financial products that make it possible to lower the volatility of interest rates and currencies and the associated potential for currency and interest rate risks to a minimum. One of these capital market tools to minimize risks in the changes shown linked to interest rate are the so called interest rate swaps. The aim of this work is to explain how interest rate risks can be minimized with interest rate swaps. It will focus on the over the counter (OTC) interest rate swaps market. In the first chapters this termpaper examine the historical development, basic model, trading platforms and different meaning for lenders and borrowers of interest rate swaps. Next, it will explain the valuation and calculation of interest rate swaps as well as the specific value drivers and approaches. In summary, it provides an overview of the different types of interest rate swaps while also taking a critical look at these derivatives.
The controlling of interest rate risk in banks
Author: Tatiana PouzikovaPublisher: diplom.de
ISBN: 3832425454
Category : Business & Economics
Languages : en
Pages : 58
Book Description
Inhaltsangabe:Einleitung: Die vorliegende Arbeit widmet sich dem Controlling des Zinsänderungsrisikos in Banken mit Hilfe des VaR-Konzeptes. Zinsänderungen wirken sich in Form des Margen-Risikos, des Reinvestment-Risikos und des Marktwertrisikos aus. Als Instrument zur Risikomessung und -steuerung in Banken wird seit Beginn der 90er Jahre der Value-at-Risk (VaR) propagiert. Der beeindruckende Vorteil des VaR-Konzeptes liegt darin, daß es einen monetären Maßstab bereitstellt, mit dem verschiedenartige Risiken zusammengeführt und vergleichbar gemacht werden. Die gängigen VaR-Modelle werden in dieser Arbeit kurz präsentiert und ihre Annahmen erläutert. Weiterhin werden die Annahmen auf ihre Gültigkeit bei der Modellierung von Zinsänderungsrisiken geprüft. Man möchte nicht nur wissen, ob diese Annahmen erfüllt sind, man möchte auch die Aussagefähigkeit von VaR auf etablierten Märkten und Emerging Markets vergleichen. Um die Performance der VaR-Methoden zu beurteilen, wird in dieser Arbeit ein Backtesting von drei Methoden - Historische Simulation, Monte Carlo Simulation und Methode der Extremwerttheorie - für zwei repräsentative Portfolios durchgeführt. Das erste Portfolio bestand aus einer DM-Bundesanleihe mit 5-jähriger Laufzeit, das zweite war ein Indexportfolio auf der Basis von JP Morgans Emerging Market Bond Index Plus für Rußland. Dabei zeigen sich deutliche Performance-Unterschiede: Während das Zinsänderungsrisiko der deutschen Anleihe relativ gut durch den VaR abgebildet wurde, erwiesen sich alle drei Methoden als unbrauchbar für den russischen Markt. Um die Ursachen für die Performance-Unterschiede auf beiden Märkten aufzuzeigen, werden die Verteilungseigenschaften beider Zeitreihen analysiert. Inhaltsverzeichnis:Table of Contents: 1.Introduction4 2.Identification of risk5 2.1Definition of interest rate risk5 2.2Components of a bank's interest rate exposure6 2.3Determinants of the term structure of interest rates12 3.Application of VaR for measurement of interest rate risk12 3.1VaR-definition13 3.2Methods of VaR- calculation15 3.3Consequences of underlying assumptions for risk estimation17 3.3.1Assumption of normal distribution17 3.3.2 Future like past assumption18 4.Specific problems of the interest rate risk estimation with VaR20 4.1Convexity20 4.2Reduced time to maturity and riding-the-yield-curve-effect22 4.3Compound effects of interest rate, exchange rate and credit risks23 4.4Further problems23 5.Empirical [...]
The Risks of Financial Institutions
Author: Mark CareyPublisher: University of Chicago Press
ISBN: 0226092984
Category : Business & Economics
Languages : en
Pages : 669
Book Description
Until about twenty years ago, the consensus view on the cause of financial-system distress was fairly simple: a run on one bank could easily turn to a panic involving runs on all banks, destroying some and disrupting the financial system. Since then, however, a series of events—such as emerging-market debt crises, bond-market meltdowns, and the Long-Term Capital Management episode—has forced a rethinking of the risks facing financial institutions and the tools available to measure and manage these risks. The Risks of Financial Institutions examines the various risks affecting financial institutions and explores a variety of methods to help institutions and regulators more accurately measure and forecast risk. The contributors--from academic institutions, regulatory organizations, and banking--bring a wide range of perspectives and experience to the issue. The result is a volume that points a way forward to greater financial stability and better risk management of financial institutions.
Bank Profitability and Risk-Taking
Author: Natalya MartynovaPublisher: International Monetary Fund
ISBN: 1513565818
Category : Business & Economics
Languages : en
Pages : 44
Book Description
Traditional theory suggests that more profitable banks should have lower risk-taking incentives. Then why did many profitable banks choose to invest in untested financial instruments before the crisis, realizing significant losses? We attempt to reconcile theory and evidence. In our setup, banks are endowed with a fixed core business. They take risk by levering up to engage in risky ‘side activities’(such as market-based investments) alongside the core business. A more profitable core business allows a bank to borrow more and take side risks on a larger scale, offsetting lower incentives to take risk of given size. Consequently, more profitable banks may have higher risk-taking incentives. The framework is consistent with cross-sectional patterns of bank risk-taking in the run up to the recent financial crisis.