Download or read book Capital Structure and Risk Dynamics Among Banks written by Keegan Floquet and published by LAP Lambert Academic Publishing. This book was released on 2011-03 with total page 280 pages. Available in PDF, EPUB and Kindle. Book excerpt: In an attempt to restore banking stability and safety during the 1980's, bank regulators typically introduced explicit minimum capital regulation to increase capital ratios and moderate risk-taking. The effects of bank regulation on the capital and risk levels of banks are not always as intended; in some cases, promoting moral hazard behaviour and further increasing the probability of insolvency. Some of these effects were at the roots of the Global Financial Crisis. This book aims to explore in greater detail the relationship between capital and risk, the reasons for this relationship and why this relationship in emerging market banks may differ from that of banks in developed markets. A comprehensive analysis of corporate financial theory relating to capital and risk are carried out and form the theoretical basis of this study.
Download or read book Capital Structures and Portfolio Composition During Banking Crisis written by Mr.Alberto M. Ramos and published by International Monetary Fund. This book was released on 1998-08-01 with total page 55 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper constructs a theoretical framework that rationalizes banks’ short- and long-run adjustment dynamics—in portfolio composition and in the capital structure—following a period of financial distress. The model captures stylized facts about banks’ behavior following a shock to the capital base—namely, the rush to liquidity and credit crunch. Bank panel data show that Argentine domestic retail banks underwent a period of adjustment of six quarters following the Mexican devaluation crisis, reducing their risk-exposure since, owing to bank capital scarcity, depositors became less prone to tolerate bank default risk. Foreign-owned banks suffered a milder shock and adjusted immediately.
Download or read book Continuous Time Models in Corporate Finance Banking and Insurance written by Santiago Moreno-Bromberg and published by Princeton University Press. This book was released on 2018-01-08 with total page 223 pages. Available in PDF, EPUB and Kindle. Book excerpt: Continuous-Time Models in Corporate Finance synthesizes four decades of research to show how stochastic calculus can be used in corporate finance. Combining mathematical rigor with economic intuition, Santiago Moreno-Bromberg and Jean-Charles Rochet analyze corporate decisions such as dividend distribution, the issuance of securities, and capital structure and default. They pay particular attention to financial intermediaries, including banks and insurance companies. The authors begin by recalling the ways that option-pricing techniques can be employed for the pricing of corporate debt and equity. They then present the dynamic model of the trade-off between taxes and bankruptcy costs and derive implications for optimal capital structure. The core chapter introduces the workhorse liquidity-management model—where liquidity and risk management decisions are made in order to minimize the costs of external finance. This model is used to study corporate finance decisions and specific features of banks and insurance companies. The book concludes by presenting the dynamic agency model, where financial frictions stem from the lack of interest alignment between a firm's manager and its financiers. The appendix contains an overview of the main mathematical tools used throughout the book. Requiring some familiarity with stochastic calculus methods, Continuous-Time Models in Corporate Finance will be useful for students, researchers, and professionals who want to develop dynamic models of firms' financial decisions.
Download or read book Bank Performance Risk and Firm Financing written by P. Molyneux and published by Springer. This book was released on 2015-12-11 with total page 314 pages. Available in PDF, EPUB and Kindle. Book excerpt: This text comprises a selection of papers that provide state of the art insights into bank performance, risk and firm financing post crisis that were presented at the European Association of University Teachers of Banking and Finance Conference (otherwise known as the Wolpertinger Conference) held at Bangor University, Wales, 2010.
Download or read book Capital Structure and Corporate Financing Decisions written by H. Kent Baker and published by John Wiley & Sons. This book was released on 2011-03-31 with total page 504 pages. Available in PDF, EPUB and Kindle. Book excerpt: A comprehensive guide to making better capital structure and corporate financing decisions in today's dynamic business environment Given the dramatic changes that have recently occurred in the economy, the topic of capital structure and corporate financing decisions is critically important. The fact is that firms need to constantly revisit their portfolio of debt, equity, and hybrid securities to finance assets, operations, and future growth. Capital Structure and Corporate Financing Decisions provides an in-depth examination of critical capital structure topics, including discussions of basic capital structure components, key theories and practices, and practical application in an increasingly complex corporate world. Throughout, the book emphasizes how a sound capital structure simultaneously minimizes the firm's cost of capital and maximizes the value to shareholders. Offers a strategic focus that allows you to understand how financing decisions relates to a firm's overall corporate policy Consists of contributed chapters from both academics and experienced professionals, offering a variety of perspectives and a rich interplay of ideas Contains information from survey research describing actual financial practices of firms This valuable resource takes a practical approach to capital structure by discussing why various theories make sense and how firms use them to solve problems and create wealth. In the wake of the recent financial crisis, the insights found here are essential to excelling in today's volatile business environment.
Download or read book Systemic Risk Bank Charter Value Capital Structure and International Complexity written by Yassine Bakkar and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Capital Structure Decisions written by Yamini Agarwal and published by John Wiley & Sons. This book was released on 2013-03-29 with total page 208 pages. Available in PDF, EPUB and Kindle. Book excerpt: Inside the risk management and corporate governance issues behind capital structure decisions Practical ways of determining capital structures have always been mysterious and riddled with risks and uncertainties. Dynamic paradigm shifts and the multi-dimensional operations of firms further complicate the situation. Financial leaders are under constant pressure to outdo their competitors, but how to do so is not always clear. Capital Structure Decisions offers an introduction to corporate finance, and provides valuable insights into the decision-making processes that face the CEOs and CFOs of organizations in dynamic multi-objective environments. Exploring the various models and techniques used to understand the capital structure of an organization, as well as the products and means available for financing these structures, the book covers how to develop a goal programming model to enable organization leaders to make better capital structure decisions. Incorporating international case studies to explain various financial models and to illustrate ways that capital structure choices determine their success, Capital Structure Decisions looks at existing models and the development of a new goal-programming model for capital structures that is capable of handling multiple objectives, with an emphasis throughout on mitigating risk. Helps financial leaders understand corporate finance and the decision-making processes involved in understanding and developing capital structure Includes case studies from around the world that explain key financial models Emphasizes ways to minimize risk when it comes to working with capital structures There are a number of criteria that financial leaders need to consider before making any major capital investment decision. Capital Structure Decisions analyzes the various risk management and corporate governance issues to be considered by any diligent CEO/CFO before approving a project.
Download or read book Capital Structures and Portfolio Composition During Banking Crisis written by Alberto Ramos and published by . This book was released on 2006 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper constructs a theoretical framework that rationalizes banks` short- and long-run adjustment dynamics in portfolio composition and in the capital structure following a period of financial distress. The model captures stylized facts about banks` behavior following a shock to the capital base namely, the rush to liquidity and credit crunch. Bank panel data show that Argentine domestic retail banks underwent a period of adjustment of six quarters following the Mexican devaluation crisis, reducing their risk-exposure since, owing to bank capital scarcity, depositors became less prone to tolerate bank default risk. Foreign-owned banks suffered a milder shock and adjusted immediately.
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:
Download or read book The ART of Risk Management written by Christopher L. Culp and published by John Wiley & Sons. This book was released on 2002-07-11 with total page 590 pages. Available in PDF, EPUB and Kindle. Book excerpt: Learn about today's hottest new risk management tools One of the hottest areas of finance today, alternative risk transfer, or ART, refers to the use of various insurance products to manage market, credit, operational, legal, environmental, and other forms of risk. As the capital and insurance markets continue to converge, the number and complexity of new risk-defraying insurance products available to corporations, brokerages, money managers and other financial professionals will continue to grow. Expert Christopher L. Culp uses case studies of recent ART transactions used by risk managers to put the field into perspective for financial professionals and to acquaint them with the various types of risk control products now available. In addition he explores, in-depth, the links between ART, derivatives and bank-arranged risk financing, and he explains the key differences between classic insurance products and financial guarantees, risk financing, bundled layering, and other ART forms.
Download or read book Structural Credit Risk Models in Banking with Applications to the Financial Crisis written by Michael B. Imerman and published by . This book was released on 2011 with total page 136 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation uses structural credit risk models to analyze banking institutions during the recent Financial crisis. The first essay proposes a dynamic approach to estimating bank capital requirements with a structural credit risk model. The model highlights the fact that static measures of capital adequacy, such as a fixed percentage of assets, do not capture the true condition of a financial institution. Rather, a dynamic approach that is forward-looking and tied to market conditions is more appropriate in setting capital requirements. Furthermore, the structural credit risk model demonstrates how market information and the liability structure can be used to compute default probabilities, which can then be used as a point of reference for setting capital requirements. The results indicate that capital requirements may be time-varying and conditional upon the health of the particular bank and the financial system as a whole. The second essay develops a structural credit risk model for computing a term-structure of default probabilities for a financial institution. The model uses current market data and the complete debt structure of the financial institution. It incorporates an endogenous default boundary in a generalized binomial lattice framework. This framework is flexible and easily permits alternate capital structure policy assumptions; for example, it can allow for the possibilities of funding maturing debt with new debt, new equity, or a mix of debt and equity. The model is implemented to analyze Lehman Brothers in the midst of the 2008 financial crisis and develop estimates of default probability under these alternate capital structure policy assumptions. The assumptions result in different levels of default probability but all predict higher default probabilities in March of 2008, well before Lehman's bankruptcy in September of 2008. In addition to being used in a descriptive capacity, the model can be used for prescriptive purposes. The lower-bound default probabilities assume de-leveraging by the financial institution and can be used to indicate when debt should be retired with new equity rather than being rolled-over.
Download or read book Bank Risk Dynamics Where Assets Are Risky Debt Claims written by Sharon Peleg Lazar and published by . This book was released on 2016 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: The structural approach views firm's equity as a call option on the value of its assets, which motivates stockholders to increase risk. However, since bank assets are risky debt claims, bank equity resembles a subordinated debt. Using this assumption, and considering the strategic interaction between a bank and its debtor, we argue that risk shifting is limited to states in which the debtor is in financial distress. Furthermore, risk shifting increases with bankruptcy costs and decreases with bank capital. Thus, increasing a bank's capital affects stability, not only through the additional capital buffer, but also by affecting the risk shifting incentive.
Download or read book Bank Business Models Capital Structure Lending Behavior and Risk written by Khuloud Alawadhi and published by . This book was released on 2017 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis investigates the relationship between bank business models, capital structure, lending behaviour and risk.First, we investigated the impact of bank business models on stock crash risk. In a sample of 1373 listed banks in 34 OECD countries over the period 2000-2013, we found that the investment bank business model is associated with lower stock crash risk while the commercial and the universal business models are more likely to encounter higher stock crash risk. In addition, we found that commission and fees income is the least likely to be prone to stock crash risk. Moreover, the findings show that there is a negative relationship between the long-term funding structure and stock crash risk, while there is a positive relationship between the short-term funding structure and stock crash risk. Second, we investigated whether stock volatility has an impact on bank capital decisions. We found that banks react to increases in stock volatility by reducing leverage, specifically, by depending more on short-term funding and less on long-term funding. We also found that banks respond to increases in stock volatility by increasing paid-in share capital and increasing the usage of reserves. By analysing banks assets, we found that during volatile periods, banks tend to hold less of risky assets, particularly, by reducing lending, depending more on securities, and increasing the holding of liquid assets. Our findings also show that the reduction in portfolio risk is associated with drops in income.Third, we investigated whether stock volatility has an impact on banks' lending decisions and whether this relationship is influenced by the financial crises. We found that banks react to stock volatility by reducing the credit supply of each of net loans, gross loans, retail loans, and commercial loans; while no significant effect is reported on mortgage loans. Moreover, the effect of both the global financial crisis (2008-2009) and the Eurozone crisis (2010-2011) are found to be associated with decreased loans, while prior the crises period (2000-2007) showed this particular relationship to be weaker. We found that bank size is an important factor determining bank lending, as large banks are found to be less affected by stock market uncertainty than small banks. We also found that stable sources of funding such as capital and customer deposits play an important role in stabilizing the lending behaviour of banks. Finally, we confirmed the significant role of stock volatility in predicting future banks' lending decisions.
Download or read book Revisiting Risk Weighted Assets written by Vanessa Le Leslé and published by International Monetary Fund. This book was released on 2012-03-01 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper, we provide an overview of the concerns surrounding the variations in the calculation of risk-weighted assets (RWAs) across banks and jurisdictions and how this might undermine the Basel III capital adequacy framework. We discuss the key drivers behind the differences in these calculations, drawing upon a sample of systemically important banks from Europe, North America, and Asia Pacific. We then discuss a range of policy options that could be explored to fix the actual and perceived problems with RWAs, and improve the use of risk-sensitive capital ratios.
Download or read book Bank Credit Rating Dynamics written by Guy Ford and published by . This book was released on 2007 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: An increase in the credit rating on the debt of an organisation is generally perceived positively, as higher credit ratings are, in the main, associated with lower perceived volatility in the market value of the assets of the entity that has issued debt. Lower asset volatility implies more stable and sustainable cash flows, and thus a lower likelihood of default on debt, and the result is a lower credit spread on the debt. If banks price their assets to realise a target return on economic capital, then a higher credit rating will result in higher loan rates if the fall in the bank's cost of capital, associated with the lower insolvency risk, is insufficient to offset the additional net income that the loan must be priced to cover. In this paper we develop a loan pricing model that assumes that financial institutions price their assets on a risk- and cost-adjusted basis and with the aim of achieving a minimum required return on the bank's economic capital holding. We compare theoretically derived decreases in the bank's cost of funds to actual data on bank credit spreads in order to ascertain the extent to which the increase in credit rating is beneficial to the bank. We find that the minimum decline in the cost of funds in our model generally exceeds the empirical data, meaning that the reduction in funding costs is insufficient to offset the increase on loan rates associated with higher economic capital. The divergence increases as the proportion of retail funds increases. We further find that the hurdle rate on economic capital is a significant factor in determining the value of a bank increasing its solvency standard. If the hurdle rate remains fixed regardless of the capital structure of the bank, then an upward movement in credit rating may have little impact on the value of the bank given the large divergence between the theoretical decline in the cost of wholesale funds and empirical data on bank credit spreads. However, the divergence is considerably less pronounced if the hurdle rate is varied in direct proportion to the leverage of the bank.
Download or read book Finance written by Frank J. Fabozzi and published by John Wiley & Sons. This book was released on 2009-06-09 with total page 832 pages. Available in PDF, EPUB and Kindle. Book excerpt: FINANCE Financial managers and investment professionals need a solid foundation in finance principles and applications in order to make the best decisions in today's ever-changing financial world. Written by the experienced author team of Frank Fabozzi and Pamela Peterson Drake, Finance examines the essential elements of this discipline and makes them understandable to a wide array of individuals, from seasoned professionals looking to fine-tune their financial skills to newcomers seeking genuine guidance through the dynamic world of finance. Divided into four comprehensive parts, this reliable resource opens with an informative introduction to the basic tools of investing and financing decision-making—financial mathematics and financial analysis (Part I). From here, you'll become familiar with the fundamentals of capital market theory, including financial markets, financial intermediaries, and regulators of financial activities (Part II). You'll also gain a better understanding of interest rates, bond and stock valuation, asset pricing theory, and derivative instruments in this section. Part III moves on to detail decision-making within a business enterprise. Topics touched upon here include capital budgeting—that is, whether or not to invest in specific long-lived projects—and capital structure. Management of current assets and risk management are also addressed. By covering the basics of investment decision-making, Part IV skillfully wraps up this accessible overview of finance. Beginning with the determination of an investment objective, this part proceeds to demonstrate portfolio theory and performance evaluation, and also takes the time to outline techniques for managing equity and bond portfolios as well as discuss the best ways to use derivatives in the portfolio management process. Filled with in-depth insights and practical advice, Finance puts this field in perspective. And while a lot of ground is covered in this book, this information will help you appreciate and understand the complex financial issues that today's companies and investors constantly face.
Download or read book Risk Management and Value Creation in Financial Institutions written by Gerhard Schroeck and published by Wiley. This book was released on 2002-10-02 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: An analysis of the links between risk management and value creation Risk Management and Value Creation in Financial Institutions explores a variety of methods that can be utilized to create economic value at financial institutions. This invaluable resource shows how banks can use risk management to create value for shareholders, addresses the advantages of risk-adjusted return on capital (RAROC) measures, and develops the foundations for a model to identify comparative advantages that emerge as a result of risk-management decisions. It is the only book needed for banking executives interested in the relationship between risk management and value creation.
