HD-Index: Pushing the Scalability-Accuracy Boundary for Approximate kNN Search in High-Dimensional Spaces

Nearest neighbor searching of large databases in high-dimensional spaces is inherently difficult due to the curse of dimensionality. A flavor of approximation is, therefore, necessary to practically solve the problem of nearest neighbor search. In this paper, we propose a novel yet simple indexing scheme, HD-Index, to solve the problem of approximate k-nearest neighbor queries in massive high-dimensional databases. HD-Index consists of a set of novel hierarchical structures called RDB-trees built on Hilbert keys of database objects. The leaves of the RDB-trees store distances of database objects to reference objects, thereby allowing efficient pruning using distance filters. In addition to triangular inequality, we also use Ptolemaic inequality to produce better lower bounds. Experiments on massive (up to billion scale) high-dimensional (up to 1000+) datasets show that HD-Index is effective, efficient, and scalable.Comment: PVLDB 11(8):906-919, 201

Determinants of bank profits and its persistence in Indian Banks: A study in a dynamic panel data framework

The paper studies the impact of bank specific, industry specific and macroeconomic factors affecting profitability of Indian Banks in a dynamic model framework .The study uses panel data from 42 Indian Scheduled Commercial Banks for the period from 2000 to 2013 and addresses the problem of endogeneity of factors and persistence of bank profits by using Generalised Method of Moments (GMM).The study finds the presence of moderate degree of persistence of profits in Indian Banking Industry, implying that the product markets of Indian Banks are moderately competitive, less opaque due to asymmetry in information. Bank specific variables such as capital to assets ratio, operating efficiency and diversification have been found to be positively affecting the bank profits. Credit risk, measured by provisions for bad debts, negatively impacts the bank profitability. The study also finds evidence in support of the Structure conduct Hypothesis (SCP), using Herfindahl – Hirschman Index (HHI). Bank profits responds positively to the GDP growth, indicating that bank profits are pro-cyclical to the growth of economy whereas the increase in inflation rate affects bank profits negatively .It is observed that the crisis period did not make any significant effect on profitability of banks suggesting that Indian Banks in the last decade have been moving towards efficiency and dynamis

Derivative use and its impact on Systematic Risk of Indian Banks: Evidence using Tobit model

The use of derivatives by Indian banks has increased in the recent past. Derivatives are complicated assets, and many characteristics of these relatively new assets have been evolving day by day. The fast growth of bank involvement in derivative markets has raised concerns about the potential hazards of this activity. On the flipside, certain characteristics of derivatives make them highly useful in hedging risks. It is a well-known fact that derivative activity is concentrated among relatively larger banks. However, very little is known about other factors that govern the decisions regarding derivative usage by banks. In theory, an exposure of bank to interest rate risk should impact the derivative transaction volume. Furthermore, the use of derivative will vary according to bank capital, bank size and its use of alternatives to hedge. The paper uses the financial characteristics of banks those trade in derivatives and banks those do not trade in derivatives , by using bank level data for 46 Indian Scheduled Commercial banks for the year 2013. A Tobit Model is used to analyse censored data on notional amount of derivative use and its relationship with various financial characteristics of banks. These financial characteristics include bank size, capital adequacy, exposure to credit and interest rate risk, profitability and liquidity. We find that derivative user banks have higher liquidity, lower interest margins, are larger. Additionally, there is evidence in support of the “assurance” capital hypothesis highlighting the use of derivatives by large well capitalised banks. The larger banks exposed with lower interest margins and higher capital ratios are more likely to use derivatives to hedge their interest rate risk. Using an augmented market model, we further calculate systematic risk exposure of banks for the year 2013 and test whether usage of derivatives and interest rate derivatives contribute towards an aggravation in the systematic risk exposure of banks. The results point towards a significant decrease in exchange rate riskiness using derivatives as well as a significant decline in the long term interest risk as well. It implies and motivates banks to indulge in derivative trading, as the systemic risk do not seem to be potentially aggravated by using them. Nevertheless, derivative activity is concentrated among well capitalised banks which can safely manage risks

Determinants of bank profits and its persistence in Indian Banks: A study in a dynamic panel data framework

The paper studies the impact of bank specific, industry specific and macroeconomic factors affecting profitability of Indian Banks in a dynamic model framework. The persistence of bank profits and endogeneity of the factors have been accounted for using Generalised Method of Moments (GMM) as suggested in Arellano & Bond, 1991.The panel data for the study have been obtained from 42 Indian Scheduled Commercial Banks for the period from 2000 to 2013 .The lag of bank profits variable ROA has been found to be significantly indicating moderate degree of persistence of profits in Indian Banking Industry. This shows that the product markets of Indian Banks are moderately competitive, and less opaque due to asymmetry in information. The Indian banking sector is not far away from becoming a perfectly competitive industry. Bank specific variables; capital to assets ratio, operating efficiency and diversification have been found to be significantly and positively affecting the bank profits. Credit risk, measured by provisions for bad debts, negatively impacts the bank profitability. The study also tests the Structure conduct Hypothesis (SCP) by using Herfindahl – Hirschman Index (HHI) and finds evidence in its support. Bank profits responds positively to the GDP growth, indicating that bank profits are pro-cyclical to the growth of economy whereas the increase in inflation rate affects bank profits negatively .It is observed that the crisis period did not make any significant effect on profitability of banks .The study concludes that there is a moderate degree of persistence of bank profits and most of the determinants of profits have a positive and a significant impact on profitability of banks which implies that Indian Banks in the last decade have been moving towards efficiency and dynamism

Determinants of bank profits and its persistence in Indian Banks: A study in a dynamic panel data framework

The paper studies the impact of bank specific, industry specific and macroeconomic factors affecting profitability of Indian Banks in a dynamic model framework. The persistence of bank profits and endogeneity of the factors have been accounted for using Generalised Method of Moments (GMM) as suggested in Arellano & Bond, 1991.The panel data for the study have been obtained from 42 Indian Scheduled Commercial Banks for the period from 2000 to 2013 .The lag of bank profits variable ROA has been found to be significantly indicating moderate degree of persistence of profits in Indian Banking Industry. This shows that the product markets of Indian Banks are moderately competitive, and less opaque due to asymmetry in information. The Indian banking sector is not far away from becoming a perfectly competitive industry. Bank specific variables; capital to assets ratio, operating efficiency and diversification have been found to be significantly and positively affecting the bank profits. Credit risk, measured by provisions for bad debts, negatively impacts the bank profitability. The study also tests the Structure conduct Hypothesis (SCP) by using Herfindahl – Hirschman Index (HHI) and finds evidence in its support. Bank profits responds positively to the GDP growth, indicating that bank profits are pro-cyclical to the growth of economy whereas the increase in inflation rate affects bank profits negatively .It is observed that the crisis period did not make any significant effect on profitability of banks .The study concludes that there is a moderate degree of persistence of bank profits and most of the determinants of profits have a positive and a significant impact on profitability of banks which implies that Indian Banks in the last decade have been moving towards efficiency and dynamism

Relationship of financial stability and risk with market structure and competition: evidence from Indian banking sector

Academic debate over the ‘competition-fragility view’ and ‘competition-stability view’, in context of the risk shift and franchise value paradigms has lead to study the concept and relationship of competition and riskiness of banks in detail. In this respect, Martinez-Miera Repullo 2010 (MMR model) has even propagated the existence of a non-linear relationship between stability and competition. We test these hypotheses on a sample of Indian banks using measures for stability and riskiness of banks. The paper investigates the impact of bank competition and impact of bank concentration on stability, as well as on the riskiness of their loan portfolios .We find evidence for the presence of non-linear relationship between stability index and competition. It may be pointed out that in case of Indian banks, both concentration and competition work simultaneously to support the competition-fragility view. Both increased concentration and decreased competition may lead to greater riskiness with greater instability. The study suggests that it is important to understand the tradeoff between competition and concentration, and their impact on riskiness of loan portfolios and stability of banks for formulating steps to foster competition within the industry

Derivative use and its impact on Systematic Risk of Indian Banks: Evidence using Tobit model

The use of derivatives by Indian banks has increased in the recent past. Derivatives are complicated assets, and many characteristics of these relatively new assets have been evolving day by day. The fast growth of bank involvement in derivative markets has raised concerns about the potential hazards of this activity. On the flipside, certain characteristics of derivatives make them highly useful in hedging risks. It is a well-known fact that derivative activity is concentrated among relatively larger banks. However, very little is known about other factors that govern the decisions regarding derivative usage by banks. In theory, an exposure of bank to interest rate risk should impact the derivative transaction volume. Furthermore, the use of derivative will vary according to bank capital, bank size and its use of alternatives to hedge. The paper uses the financial characteristics of banks those trade in derivatives and banks those do not trade in derivatives , by using bank level data for 46 Indian Scheduled Commercial banks for the year 2013. A Tobit Model is used to analyse censored data on notional amount of derivative use and its relationship with various financial characteristics of banks. These financial characteristics include bank size, capital adequacy, exposure to credit and interest rate risk, profitability and liquidity. We find that derivative user banks have higher liquidity, lower interest margins, are larger. Additionally, there is evidence in support of the “assurance” capital hypothesis highlighting the use of derivatives by large well capitalised banks. The larger banks exposed with lower interest margins and higher capital ratios are more likely to use derivatives to hedge their interest rate risk. Using an augmented market model, we further calculate systematic risk exposure of banks for the year 2013 and test whether usage of derivatives and interest rate derivatives contribute towards an aggravation in the systematic risk exposure of banks. The results point towards a significant decrease in exchange rate riskiness using derivatives as well as a significant decline in the long term interest risk as well. It implies and motivates banks to indulge in derivative trading, as the systemic risk do not seem to be potentially aggravated by using them. Nevertheless, derivative activity is concentrated among well capitalised banks which can safely manage risks

Relationship of financial stability and risk with market structure and competition: evidence from Indian banking sector

Academic debate over the ‘competition-fragility view’ and ‘competition-stability view’, in context of the risk shift and franchise value paradigms has lead to study the concept and relationship of competition and riskiness of banks in detail. In this respect, Martinez-Miera Repullo 2010 (MMR model) has even propagated the existence of a non-linear relationship between stability and competition. We test these hypotheses on a sample of Indian banks using measures for stability and riskiness of banks. The paper investigates the impact of bank competition and impact of bank concentration on stability, as well as on the riskiness of their loan portfolios .We find evidence for the presence of non-linear relationship between stability index and competition. It may be pointed out that in case of Indian banks, both concentration and competition work simultaneously to support the competition-fragility view. Both increased concentration and decreased competition may lead to greater riskiness with greater instability. The study suggests that it is important to understand the tradeoff between competition and concentration, and their impact on riskiness of loan portfolios and stability of banks for formulating steps to foster competition within the industry

Market Valuation and Risk Assessment of Indian Banks using Black -Scholes -Merton Model

The most pernicious effect of the global financial crisis is that it triggers a sequence of unpleasant consequences for the banking sector and for the entire economy as a whole. The recent financial crisis has compelled regulators to focus on the necessity of resilience of banks towards risks and sudden financial shocks. The riskiness of banks assets and its equity are two important factors for valuation of banks. These risks can be incorporated in market valuation only through Black-Scholes-Merton Model. This paper uses Black-Scholes-Merton option valuation approach for calculation of the market value and volatility of bank’s assets for a random sample of 13 Public and 8 Private sector banks in India over the period from March 2003 to March 2012. Further, it calculates yearly Z-score for each bank, allowing for capital adequacy as per the Basel II and III norms, for the periods before and after 2008 financial crisis. The obtained Z-scores suggest that the Indian banks are far from default and the impact of global recession of 2008 on the banks solvency was insignificant. All the Indian banks have market value to enterprise value ratio typically in the range of 93 to 99 per cent, suggesting that market value of bank’s assets obtained from Black-Scholes-Merton is characteristically below its enterprise value since market value considers the riskiness of the equity and assets both. It is found that the volatility of banks assets is significantly different for public and private sector banks over the period of study. Investigation of NPA to Total Assets reveals that presently NPA levels of the public sector banks are increasing whereas it is declining for the private sector banks