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Book Measuring Rents and Interest Rate Risk in Imperfect Financial Markets

Download or read book Measuring Rents and Interest Rate Risk in Imperfect Financial Markets written by David E. Hutchison and published by . This book was released on 1998 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Traditional measures of interest rate risk assume that prices of financial assets and liabilities are set in perfectly competitive markets. However, evidence suggests that many retail financial markets do not follow the competitive paradigm. In this paper we employ a general contingent claims framework to value rents earned by banks in demandable retail deposit markets. Our analysis provides a natural and economically meaningful measure of interest rate risk for these imperfectly competitive markets. Using monthly survey data on NOW accounts and MMDAs, we estimate the value of retail deposit rents and deposit durations for over 200 commercial banks.

Book International Convergence of Capital Measurement and Capital Standards

Download or read book International Convergence of Capital Measurement and Capital Standards written by and published by Lulu.com. This book was released on 2004 with total page 294 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Book Wegweiser zur fahrradfreundlichen Stadt

Download or read book Wegweiser zur fahrradfreundlichen Stadt written by and published by . This book was released on 1987 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Book Interest Rate Risk in the Banking Book

Download or read book Interest Rate Risk in the Banking Book written by Beata Lubinska and published by John Wiley & Sons. This book was released on 2021-10-15 with total page 256 pages. Available in PDF, EPUB and Kindle. Book excerpt: Introduces practical approaches for optimizing management and hedging of Interest Rate Risk in the Banking Book (IRRBB) driven by fast evolving regulatory landscape and market expectations. Interest rate risk in the banking book (IRRBB) gained its importance through the regulatory requirements that have been growing and guiding the banking industry for the last couple of years. The importance of IRRBB is shifting for banks, away from ‘just’ a regulatory requirement to having an impact on the overall profitability of a financial institution. Interest Rate Risk in the Banking Book sheds light on the best practices for managing this importance risk category and provides detailed analysis of the hedging strategies, practical examples, and case studies based on the author’s experience. This handbook is rich in practical insights on methodological approach and contents of ALCO report, IRRBB policy, ICAAP, Risk Appetite Statement (RAS) and model documentation. It is intended for the Treasury, Risk and Finance department and is helpful in improving and optimizing their IRRBB framework and strategy. By the end of this IRRBB journey, the reader will be equipped with all the necessary tools to build a proactive and compliant framework within a financial institution. Gain an updated understanding of the evolving regulatory landscape for IRRBB Learn to apply maturity gap analysis, sensitivity analysis, and the hedging strategy in banking contexts • Understand how customer behavior impacts interest rate risk and how to manage the consequences Examine case studies illustrating key IRRBB exposures and their implications Written by London market risk expert Beata Lubinska, Interest Rate Risk in the Banking Book is the authoritative resource on this evolving topic.

Book Information and Accuracy in Interest rate risk Simulation

Download or read book Information and Accuracy in Interest rate risk Simulation written by Mike Carhill and published by . This book was released on 1994 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Book Estimating the Interest Rate Sensitivity of Liquid Retail Deposit Values

Download or read book Estimating the Interest Rate Sensitivity of Liquid Retail Deposit Values written by James A. O'Brien and published by . This book was released on 1994 with total page 62 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Book Analyzing the Interest Rate Risk of Banks Using Time Series of Accounting Based Data

Download or read book Analyzing the Interest Rate Risk of Banks Using Time Series of Accounting Based Data written by Oliver Entrop and published by . This book was released on 2016 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper describes the first thorough analysis of the interest risk of German banks on an individual bank level. We develop a new method that is based on time series of accountingbased data to quantify the interest risk of banks and apply it to analyze the German banking system. We find evidence that our model yields a significantly better fit of banks' internally quantified interest rate risk than a standard approach that relies on one-point-in-time data, and that the interest rate risk differs between banks of different size and banking group. Additionally, we find structural differences between trading book and non-trading book institutions.

Book Negative Interest Rate Policy NIRP

Download or read book Negative Interest Rate Policy NIRP written by Andreas Jobst and published by International Monetary Fund. This book was released on 2016-08-10 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: More than two years ago the European Central Bank (ECB) adopted a negative interest rate policy (NIRP) to achieve its price stability objective. Negative interest rates have so far supported easier financial conditions and contributed to a modest expansion in credit, demonstrating that the zero lower bound is less binding than previously thought. However, interest rate cuts also weigh on bank profitability. Substantial rate cuts may at some point outweigh the benefits from higher asset values and stronger aggregate demand. Further monetary accommodation may need to rely more on credit easing and an expansion of the ECB’s balance sheet rather than substantial additional reductions in the policy rate.

Book The Fundamentals of Risk Measurement

Download or read book The Fundamentals of Risk Measurement written by Christopher Marrison and published by McGraw Hill Professional. This book was released on 2002-06-27 with total page 440 pages. Available in PDF, EPUB and Kindle. Book excerpt: TABLE OF CONTENTS Chapter 1: The Basics of Risk Management This chapter introduces how banks work. It describes how they make money, how they often lose money, and how they try to manage their losses. It includes thirteen short case studies showing how banks have lost money. Chapter 2: Risk Measurement at the Corporate Level: Economic Capital and RAROC Chapter Two discusses the meaning of capital and how the risks that a bank faces are related to the amount of capital that the bank should hold. It then describes the two fundamental building blocks of integrated risk measurement: Economic Capital and Risk Adjusted Return on Capital (RAROC). Chapter 3: Review of Statistics Chapter Three is useful for those readers who do not have a recent working knowledge of statistics. It reviews the statistical relationships that are commonly used in risk measurement and provides reference material for the rest of the book. Examples are provided using financial loss data. MARKET RISK SECTION Chapter 4: Background on Traded Instruments This chapter gives an overview of the main types of traded instruments: bonds, equities and derivatives. It gives a qualitative description of the instrument, examples of calculating the instrument’s value and the basic risk metrics such as duration and the Greeks. This chapter is useful for those readers who are new to the finance industry. Chapter 5: Market Risk Measurement This chapter describes the most common ways to measure market risks: Sensitivity analysis, Stress testing, Scenario testing, Sharpe Ratio and Value at Risk. It gives detailed examples of using each of the metrics. Chapter 6: The Three Common Approaches for Calculating Value at Risk Value at Risk (VaR) has become the standard approach for measuring market risk. This chapter is devoted to explaining the details of the three common approaches to calculating VaR: Parametric VaR, Historical VaR and Monte Carlo VaR. We work though increasingly complex examples and compare the strengths of each approach. (Note: many readers will be particularly interested in this chapter because the name “VaR” is well known and has a certain mystery) Chapter 7: Value at Risk Contribution The Value at Risk Contribution (VaRC) is a useful way of pinpointing the source of the portfolio’s risk. VaRC can break down the risk by instrument, trading desk or market risk factor. Examples are given for several types of VaRC. Chapter 8: Testing VaR Results to Ensure Proper Risk Measurement This chapter discusses the procedures required by regulators to backtest VaR calculators to check that their predictions of losses are consistent with market events. Chapter 9: Calculating Capital for Market Risk VaR is used as the basis for calculating both Regulatory Capital and Economic Capital for Market Risks. In this chapter VaR also extended to measure the risk of Asset Management operations. Chapter 10: Overcoming VaR Limitations Although VaR is the best single metric for market risks, is has several limitations. The limitations and typical solutions are discussed in this chapter. Chapter 11: The Management of Market Risk This chapter concludes the market risk section by describing how the results of risk measurement are used by management to identify the sources of risk. It also describes the process of setting VaR Limits. (Note: readers should be particularly interested in VaR Limits because it is difficult and an important element in controlling a bank’s risk). ASSET/LIABILITY MANGEMENT SECTION Chapter 12: Introduction to Asset Liability Management Asset Liability Management (ALM) is primarily concerned with the interest rate and liquidity risks that are created when commercial banks take in short term deposits from customers and give out long term loans. This chapter describes how those risks arise and the risk characteristics of different types of deposits and loans. Chapter 13: Measurement of Interest Rate Risk for ALM This chapter discussed the primary techniques used to measure interest rate risk: Gap reports, Rate shift scenarios and Simulations Chapter 14: Funding Liquidity Risk in ALM The measurement of liquidity risk is broken into three groups: expected, unusual and crisis events. Measurement techniques are given for each group. Chapter 15: Funds Transfer Pricing and the Management of ALM Risks A key use of asset/liability measurement is the calculation of the fair price at which funds should be lent from one department to another within a bank. This is one of the keys to integrated risk measurement and is a critical component in measuring risk-adjusted profitability and setting prices to customers. A typical balance sheet is used to illustrate how transfer pricing works in detail. CREDIT RISK SECTION Chapter 16: Introduction to Credit Risk This chapter discusses the sources of credit risk and how measurement is used to manage the risks Chapter 17: Types of Credit Structure For readers who are unfamiliar with lending operations, we discuss the ways that credit exposures are structured in commercial and retail lending. It also describes the calculation of credit exposure for derivatives trading operations and gives an overview of credit derivatives. Chapter 18: Risk Measurement for a Single Facility This chapter shows how the Expected Loss and Unexpected Loss for a loan can be calculated from the Probability of Default, Loss In the Event of Default, Exposure at Default and the Grade Migration Matrix. Chapter 19: Estimating Parameter Values for Single Facilities One of the main difficulties in credit risk measurement is the estimation of values for Probability of Default, Loss Given Default and Exposure at Default. This chapter discusses estimation techniques such as Discriminant Analysis and the Merton Model. It also gives parameter values that can be used as the basis for the reader’s own models. The parameter values are used in examples to demonstrate how the credit risk calculations are used. Chapter 20: Risk Measurement For A Credit Portfolio: Part One To estimate the overall risk for a portfolio many credit instruments, we must examine the correlation between losses. This chapter describes the Covariance Credit Portfolio Model and the different approaches available for estimating default correlations. It also describes how the correlations can be used to estimate the Unexpected Loss Contribution and the Economic Capital for a single facility within a portfolio. Chapter 21: Risk Measurement For A Credit Portfolio: Part Two This chapter describes the four other widely used approaches for estimating the risk of credit portfolios: the actuarial model, the Merton-based simulation model, the macro economic default model and the macro economic cashflow model used for structured and project finance. It concludes with a section describing how the models can be combined in a unified framework to create an integrated simulation of all the bank’s risks Chapter 22: Risk Adjusted Performance and Pricing for Loans Knowing the economic capital for a loan, this chapter shows how to calculate the minimum price that should be charged to a loan customer. The analysis shows how to include multi-year effects such as grade migration. Illustrative examples are included. (Note: this chapter should be of interest to readers because loan pricing is another difficult and important subject that is rarely discussed in other books) Chapter 23: Regulatory Capital for Credit Risk The Basel Committee on Banking Supervision (often called the BIS) is planning fundamental changes to the way that banks must calculate the capital that they hold. The new calculations will be very similar to the calculations described in the rest of this book for economic capital. This chapter summarizes the history of the Capital Accords then compares the different approaches that the BIS will allow. It also gives a standard plan for implementing the new Accords. (Note: this should be of interest to readers because the shift to BIS measurement is of major importance, it will be difficult for most banks, and it must be completed by 2005) OPERATING RISK SECTION Chapter 24: Operating risk The quantification of Operating Risks is on the frontier of the industry’s understanding of risk measurement. The risk estimation approaches can be categorized as either qualitative, structural or actuarial. These approaches are described including Key Risk Indicators and the BIS approaches. INTEGRATED RISK SECTION Chapter 25: Inter-risk Diversification and Bank-Level RAROC This chapter describes how all the models are linked to calculate Economic Capital and Risk Adjusted Profitability for the Bank as a whole. It concludes with of the steps normally required to implement the bank-wide measurement of Economic Capital and RAROC.pital and RAROC.

Book Interest Rate Risk and the Regulation of Financial Institutions

Download or read book Interest Rate Risk and the Regulation of Financial Institutions written by David H. Pyle and published by . This book was released on 1978 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: A bank or other financial institution is potentially subject to at least four types of risk: (1) Credit risk -- defaults or delays in repayments. (2) Fraud -- embezzlement or insider abuse. (3) Liquidity risk -- or high cost of obtaining needed cash. (4) Interest rate risk -- differential changes in the value of assets and liabilities as interest rates shift. This paper reports a study of the interest-rate elasticity of the net worth of a commercial bank. Most of the study is devoted to the development of the necessary methodology to measure the interest-rate elasticity (IRE) of a bank's asset/liability mix. The report is organized into four major sections. The first summarizes the history of interest-rate elasticity models and points out the problems in applying them to bank assets and liabilities. An analytical framework is then developed to calculate the IRE of a portfolio of assets and liabilities. The next three sections apply the framework to a simulated bank. For simplicity, the bank is assumed to have only two classes of assets (commercial loans and cash) and three classes of liabilities(demand deposits, large denomination CD's, and capital). The second section develops models of the cash flows associated with each of the assets and liabilities. The third section quantifies the parameters necessary to calculate the net worth and IRE measures, and the fourth section details the design of a simulation and some simulation results for the 1973-75 period. The report concludes with a discussion of the regulatory implications of the study

Book The Rise of Digital Money

Download or read book The Rise of Digital Money written by Mr.Tobias Adrian and published by International Monetary Fund. This book was released on 2019-07-15 with total page 20 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper marks the launch of a new IMF series, Fintech Notes. Building on years of IMF staff work, it will explore pressing topics in the digital economy and be issued periodically. The series will carry work by IMF staff and will seek to provide insight into the intersection of technology and the global economy. The Rise of Digital Money analyses how technology companies are stepping up competition to large banks and credit card companies. Digital forms of money are increasingly in the wallets of consumers as well as in the minds of policymakers. Cash and bank deposits are battling with so-called e-money, electronically stored monetary value denominated in, and pegged to, a currency like the euro or the dollar. This paper identifies the benefits and risks and highlights regulatory issues that are likely to emerge with a broader adoption of stablecoins. The paper also highlights the risks associated with e-money: potential creation of new monopolies; threats to weaker currencies; concerns about consumer protection and financial stability; and the risk of fostering illegal activities, among others.

Book The Fed in Print

Download or read book The Fed in Print written by and published by . This book was released on 1993 with total page 74 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Book Negative Monetary Policy Rates and Portfolio Rebalancing Evidence from Credit Register Data

Download or read book Negative Monetary Policy Rates and Portfolio Rebalancing Evidence from Credit Register Data written by Margherita Bottero and published by International Monetary Fund. This book was released on 2019-02-28 with total page 59 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study negative interest rate policy (NIRP) exploiting ECB's NIRP introduction and administrative data from Italy, severely hit by the Eurozone crisis. NIRP has expansionary effects on credit supply-- -and hence the real economy---through a portfolio rebalancing channel. NIRP affects banks with higher ex-ante net short-term interbank positions or, more broadly, more liquid balance-sheets, not with higher retail deposits. NIRP-affected banks rebalance their portfolios from liquid assets to credit—especially to riskier and smaller firms—and cut loan rates, inducing sizable real effects. By shifting the entire yield curve downwards, NIRP differs from rate cuts just above the ZLB.