How Useful Are Banks' Earnings-At-Risk And Economic Value Of Equity-At-Risk Public Disclosures?

This paper examines the information content and the usefulness of banks' interest rate risk public disclosures. ALM managers use Earnings at Risk ( EAR ) and Economic Value of Equity at Risk ( EVEAR ) as measures of the dollar amount of potential loss to net interest income and common shareholders' equity as a result of unforeseen interest rate changes. These two interest rate risk management metrics are now recognized benchmarks for measuring interest rate risk exposure, and its potential impact on a bank's financial position. At the explicit request of regulators, financial analysts and competitive pressures, more commercial banks are now reporting EAR and EVEAR numbers in their annual financial reports. To examine preliminary evidence on the information content of such public disclosures, we composed a sample of some of North America's largest commercial banks. The Canadian peer group is based on Canada's seven largest banks, and the U.S. peer group is composed of twelve of its largest banks. In particular, we investigate if "ex ante" EAR and EVEAR numbers help regulators, financial analysts and investors to explain the subsequent variability of commercial banks' net interest income and net income over time

The GARCH (1, 1) Model As A Risk Predictor For International Portfolios

This study pertains to forecasting portfolio risk using a GARCH (Generalized Autoregressive Conditional Heteroscedasticity) approach. Three models are compared to the GARCH model (1,1) i.e., random walk (RW), historical mean (HMM) and J.P. Morgans exponentially weighted moving average (EWMA). In recent years, many volatility forecasting models have been presented in the financial literature. Using the historical average of stock returns to determine the optimal portfolio is current practice in academic circles. However, we doubt the ability of this method to provide the best estimated portfolio variance. Moreover, an error in the estimated covariance matrix could result in a completely different portfolio mix. Consequently, we believe it would be relevant to examine the volatility forecasting model proposed in different studies to estimate the standard deviation of an efficient portfolio. With a view to building an efficient portfolio in an international context, we will analyze the forecasting models mentioned above. The purpose of this research is to determine whether a GARCH approach to forecasting the covariance matrix makes it possible to obtain a risk that most resembles the actual observed risk for a given return than the model traditionally used by practitioners and academic researchers. To this end, we selected six international stock indices. The study was conducted in a Canadian context and consequently, each stock index is converted into Canadian dollars. Initially, we estimate the covariance matrix for each forecasting model mentioned above. Then, we determine the proportions to invest in the portfolio and calculate the standard deviation of a minimum variance portfolio. Finally, the best model is selected based on the variances between estimated and actual risk by minimizing the root mean squared error (RMSE) for each forecasting model. Our results show that the GARCH (1,1) model is good for estimating risk in a minimum variance portfolio. As well, we find that it is statistically impossible to make a distinction between the accuracy of this model and the RW model. Lastly, our results show that based on the four statistical error measures used, the HMM is the least accurate for estimating portfolio risk. We therefore decided not to use this model and to rely instead on the GARCH approach or the RW, the simplest of all the models

The Informational Content Of Voluntary Embedded Value (EV) Financial Disclosures By Canadian Life Insurance Companies

The informational content and relevance to external stakeholders of voluntary financial disclosures by commercial banks is now becoming more widely recognized. For instance, banks voluntary disclosures of liquidity, interest rate and market risk metrics have been bound to be closely associated with market value of equity and credit ratings. So far, there has been very scarce published research on investigating the informational content and relevance to external stakeholders of voluntary financial disclosures by life insurance companies. In order to improve upon this situation, this paper studies and reports the informational content of voluntary embedded value (EV) financial disclosures by Canadian life insurance companies. As opposed to traditional statutory balance sheet and earnings reporting, EV voluntary disclosure attempts to estimate the present value of future earnings generated by a life insurers current book of various insurance businesses. The preliminary results presented in this study indicate that EV voluntary financial disclosures communicate intrinsic informational content and provide value relevance to external stakeholders in the sense that they were found to be closely associated with life insurers market value of equity

The Analysis Of Comments Received By The BIS On Principles For Sound Liquidity Risk Management And Supervision

The market turmoil that began in mid-2007 re-emphasized the importance of liquidity to the functioning of financial markets and the banking sector. In June 2008, the Basel Committee of the Bank for International Settlements (BIS) released a consultative document on Principles for Sound Liquidity Risk Management and Supervision. Interested parties were invited to provide written comments by the end of July 2008. As a result, the Committee received many comments for publication by 30 different commenters. Our analysis first indicates that comments were formulated on each of the 17 principles discussed in the consultative document. Second, comments were also made in each of the five separate defined areas of focus covered by the 17 principles. Third, the results of our analysis reveal that opinions on different principles differed the most when commenters were separated into four distinct categories: banking trade associations, regulatory supervisors, individual financial institutions, and others (consultants, academics, accounting associations, and financial information providers). Last but not least, the results of the study indicate that commenters’ opinions, both within a category and between categories, differed the most in the two following defined areas of focus: measurement and management of liquidity risk and public disclosure of quantitative information on liquidity risk management

The Informational Content Of Voluntary Embedded Value (EV) Financial Disclosures By Canadian Life Insurance Companies During The Recent Period Of Market Turmoil

The informational content and relevance to external stakeholders of voluntary financial disclosures by commercial banks is now becoming more widely recognized. For instance, banks voluntary disclosures of liquidity, interest rate and market risk metrics have been found to be closely associated with market value of equity and credit ratings. So far, there has been very scarce published research on investigating the informational content and relevance to external stakeholders of voluntary financial disclosures by life insurance companies during the recent period of market turmoil. In order to improve upon this situation, this paper updates previous findings and reports on the informational content of voluntary embedded value (EV) financial disclosures by Canadian life insurance companies during the 2000-2010 time period. As opposed to traditional statutory balance sheet and earnings reporting, EV voluntary disclosure attempts to estimate the present value of future earnings generated by a life insurers current book of various insurance businesses. The preliminary results presented in this study indicate that recent EV voluntary financial disclosures failed to communicate intrinsic informational content and to provide value relevance to external stakeholders in the sense that they were not found to be closely associated with life insurers market value of equity and credit ratings during the recent 2007-2010 period of market turmoil

Liquidity Risk Financial Disclosure: The Case Of Large European Financial Groups

This paper examines the informational content and the usefulness of financial groups' liquidity risk public financial disclosure. This theme is of interest since the factors that influence the level of liquidity risk are complex, and they strongly interact with other originating factors from related financial risks. These characteristics have made it more difficult for financial services industry regulators and private sector ERM experts to recommend a practical and well defined framework for the management and subsequent public disclosure of liquidity risk financial information. The results of the study are based on an in-depth content analysis of the Annual reports (2004) published by twenty-one of Western Europe's largest financial groups using the liquidity risk management factors proposed by the Basel Committee on Banking Supervision and its Joint Forum (2003, 2006). The results of the study revealed a disparity between commercial banks from the same or different European countries as to the level and extent of liquidity risk public financial disclosure. The same was also found for the description of the risk management structures and the accompanying explanatory comments on liquidity risk management practices. In addition, the study documented the overall scarcity of quantitative data which supports qualitative discussions on liquidity risk management. There were also areas of more complete financial disclosure that apply to factors explaining the origins of cash flows, and the explanations and discussion about foreign exchange risk management

The Informational Content Of The VaR Measures Associated With The Trading Activities Of Canadian Banks

This paper examines the informational content and the usefulness of Canadian banks' market risk public disclosures. Risk managers use Value at Risk (VAR) as a measure of the dollar amount of a large potential loss to a bank's trading income and common shareholders' equity as a result of extreme and low-probability market price changes. Five different VAR metrics (high, low, range of estimates, average and end-of-period values) are now published and recognized benchmarks for measuring market risk exposure, and its potential impact on a bank's financial position. At the explicit request of regulators, financial analysts and competitive pressures, most large commercial banks in North America are now reporting the five forms of VAR numbers described above in their quarterly and annual financial reports. To examine preliminary evidence on the informational content of such public financial disclosures, we composed a sample of seven of Canada's largest commercial banks. In particular, we investigate if "ex ante" VAR numbers help financial analysts, investors, and regulators to explain the subsequent variability of commercial banks' trading income and of their ratio of market value to book value of common shareholders' equity over time

Sanctions prises dans l'ancien diocèse de Beauvais au XVIIe siècle, contre les réfractaires du devoir pascal

Vinot-Préfontaine Jean. Sanctions prises dans l'ancien diocèse de Beauvais au XVIIe siècle, contre les réfractaires du devoir pascal. In: Revue d'histoire de l'Église de France, tome 45, n°142, 1959. pp. 76-83

La fondation du séminaire de Beauvais et le jansénisme dans le diocèse au XVIIe siècle

Vinot-Préfontaine Jean. La fondation du séminaire de Beauvais et le jansénisme dans le diocèse au XVIIe siècle. In: Revue d'histoire de l'Église de France, tome 19, n°84, 1933. pp. 347-371