8,809 research outputs found
Bayesian Methods for Measuring Operational Risk
The likely imposition by regulators of minimum standards for capital to cover 'other risks' has been a driving force behind the recent interest in operational risk management. Much discussion has been centered on the form of capital charges for other risks. At the same time major banks are developing models to improve internal management of operational processes, new insurance products for operational risks are being designed and there is growing interest in alternative risk transfer, through OR-linked products.
The Present, Future and Imperfect of Financial Risk Management
Current research on financial risk management applications of econometrics centres on the accurate assessment of individual market and credit risks with relatively little theoretical or applied econometric research on other types of risk, aggregation risk, data incompleteness and optimal risk control. We argue that consideration of the model risk arising from crude aggregation rules and inadequate data could lead to a new class of reduced form Bayesian risk assessment models. Logically, these models should be set within a common factor framework that allows proper risk aggregation methods to be developed. We explain how such a framework could also provide the essential links between risk control, risk assessments and the optimal allocation of resources.Financial risk assessment; risk control, RAROC, economic capital; regulatory capital; optimal allocation of resources
An analysis of euro area sovereign CDS and their relation with government bonds
This paper studies the relative pricing of euro area sovereign CDS and the underlying government bonds. Our sample comprises weekly CDS and bond spreads of ten euro area countries for the period from January 2006 to June 2010. We first compare the determinants of CDS spreads and bond spreads and test how the crisis has affected market pricing. Then we analyse the âbasisâ between CDS spreads and bond spreads and which factors drive pricing differences between the two markets. Our first main finding is that the recent repricing of sovereign credit risk in the CDS market seems mostly due to common factors. Second, since September 2008, CDS spreads have on average exceeded bond spreads, which may have been due to âflight to liquidityâ effects and limits to arbitrage. Third, since September 2008, market integration for bonds and CDS varies across countries: In half of the sample countries, price discovery takes place in the CDS market and in the other half, price discovery is observed in the bond market. JEL Classification: G00, G01CDS, Credit Spread, financial crisis, Government bond, limits to arbitrage
A study differentiating credit risk management strategy between Islamic and non-Islamic Banks in UEA
This study attempts to identify any differences between Islamic and non-Islamic banks in UAE. Furthermore, factors affecting rate of return on lending have also been examined for UAE banks, Islamic and non-Islamic banks.
This study has used quantitative research design. Data has been collected through questionnaire. Data is obtained directly as primary evidence from the senior credit risk managers from all the local commercial banks within United Arab Emirates. The sample for the study consists of 6 commercial banks from UAE with 3 non-Islamic and 3 Islamic banks with 148 credit risk managers as respondents for the survey. Descriptive statistic and inferential statistics are used to obtain the results.
Islamic and non-Islamic banks differ in 'expert system', 'lending policy' and 'lending decisions'. Islamic banks are performing better making lending decision and lending policies than non-Islamic banks. Whereas, non-Islamic (conventional) banks are having better expert system than Islamic bank. All explanatory variables i.e. bank-wise exposure, experts system, company factors, lending decision, corporate borrowers, demographic variables and lending policy have significant influence on the profitability of UAE banks. Overall, credit risk management practices of Islamic banks are significantly contributing in profitability of banks than non-Islamic banks. Originality - This paper uses questionnaire-based methodology has not been used previously in UAE financial sector as well as in studies of credit risk management. Therefore this research could become the cornerstone of further academic research in other developing countries using this methodology. Practical implication. This study is significantly important for the academic point of view as well as for the practitioners, risk managers and policy makers
An empirical analysis on the credit scoring and the intermediary role of financing guarantee institutions of China's car loans
By the end of 2018, China's car ownership has reached 240 million, an increase of 10.51%
over 2017, which leads to the increase of automobile financial services and hence the
associated automobile credit risks. In order to transfer risks, financial institutions
increasingly are choosing to issue auto loans through financing guarantee companies.
Therefore, the industry pays more attention to the credit scoring, as it acts as the main risk
control measure of auto financing guarantee companies. This leads to the study of the role
the financing guarantee company plays and how effective the credit rating is as a risk control
mechanism.
The purpose is to investigate whether the auto financing guarantee company plays a
mediating role by providing credit score. The empirical approach is as follows: a two-stage
regression method is used to control or eliminate the influence of personal characteristics
and other third-party credit ratings. Through which, we firstly test whether the credit score
of an auto financing guarantee company contains additional information besides personal
characteristics and third-party credit scores. Second, we test whether additional information
of auto financing guarantee company can significantly explain the post-loan performance of
whether default or non-default.
The conclusions show that even after controlling the third-party credit score and
personal characteristics, the credit scoring system of auto financing guarantee companies
still has a significant explanation on the performance of post-loan default. In other words, it
plays an intermediary role by providing credit evaluation services, which has a direct
decision reference for the financial institutions that ultimately provide credit.
Based on this, this study puts forward corresponding management enhancement and
loan risk management suggestions.No final de 2018, a propriedade automóvel na China atingiu 240 milhÔes, um aumento
de 10.51% sobre 2017, o que leva ao aumento dos serviços financeiros automóvel e, portanto,
dos riscos de crédito automóvel associados. Para mitigar riscos, as instituiçÔes financeiras
optam, cada vez mais, por conceder empréstimos automóvel através de empresas de garantia.
Por conseguinte, a indĂșstria presta mais atenção Ă pontuação do crĂ©dito, uma vez que esta
atua como a principal medida de controlo do risco das empresas de garantia de
financiamento-automĂłvel. Isto conduz ao estudo do papel desempenhado pela empresa de
garantia de financiamento e da eficåcia da sua notação de crédito como mecanismo de
controlo dos riscos.
Com base no sistema de notação de crĂ©dito da Tâs e num total de 119.798 registos de
empréstimos, este estudo examina o poder explicativo da notação de crédito das empresas
de garantia de financiamento automóvel no incumprimento dos mutuårios e as funçÔes
mediadoras destas empresas.
Utiliza-se um método de regressão em dois estågios para controlar ou eliminar a
influĂȘncia de caracterĂsticas pessoais e outros ratings, testando primeiro se a notação de
crédito de uma empresa de garantia contém informaçÔes adicionais e testando, depois, se as
informaçÔes adicionais da empresa de garantia podem explicar significativamente o
desempenho do mutuårio pós-empréstimo,
As conclusÔes mostram que, mesmo após controlar a notação de crédito de terceiros e
as caracterĂsticas pessoais, o sistema de notação de crĂ©dito das empresas de garantia tem uma
explicação significativa no desempenho do mutuårio pós-empréstimo. Ou seja, ele
desempenha um papel mediador, fornecendo serviços de avaliação de crĂ©dito que tĂȘm
influĂȘncia direta na decisĂŁo das instituiçÔes financeiras que, finalmente, fornecem crĂ©dito.
Correspondentemente, esta investigação apresenta sugestÔes de melhoramento da
gestão do risco de crédito
Perceptions and Participation: Mistaken Beliefs, Encouragement Designs, and Demand for Index Insurance.
Replaced with revised version of paper 07/20/10.International Development, Research Methods/ Statistical Methods,
Why does Implied Risk Aversion Smile?
A few recent papers have derived estimates of the representative agent's risk aversion by comparing the statistical density of asset returns and the state-price density. The implied risk aversion estimates obtained in these studies are puzzling, exhibiting (i) pronounced U-shaped patterns (a "smile") and (ii) negative values. This paper analyzes three potential explanations for these phenomena: (i) heterogeneity in investor preferences, (ii) difficulties in estimating agents' beliefs and (iii) heterogeneous beliefs among agents. Our results show that preferences alone cannot explain the patterns reported in the literature. Misestimation of investors' beliefs caused by nonstationarity of the return process cannot explain the smile either. The patterns of beliefs misestimation required to generate the empirical implied risk aversion estimates found in the literature suggest that heterogeneous beliefs are the most likely cause of the smile.asset pricing; state-price density; heterogeneous preferences; heterogeneous beliefs; implied risk aversion
Sensitivity analysis using risk measures
In a quantitative model with uncertain inputs, the uncertainty of the output can be summarized by a risk measure. We propose a sensitivity analysis method based on derivatives of the output risk measure, in the direction of model inputs. This produces a global sensitivity measure, explicitly linking sensitivity and uncertainty analyses. We focus on the case of distortion risk measures, deïŹned as weighted averages of output percentiles, and prove a representation of the sensitivity measure that can be evaluated on a Monte-Carlo sample, as a weighted average of gradients over the input space. When the analytical model is unknown or hard to work with, non-parametric techniques are used for gradient estimation. This process is demonstrated through the example of a non-linear insurance loss model. Furthermore, the proposed framework is extended in order to measure sensitivity to constant model parameters, uncertain statistical parameters, and random factors driving dependence between model inputs
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