The impact of capital thresholds on credit risk: Empirical evidence on Malaysian mixed banking systems

2019 ◽  
Author(s):  
Hishamuddin Abdul Wahab
Keyword(s):  
Credit Risk ◽  
Empirical Evidence ◽  
Banking Systems ◽  
The Impact

scholarly journals A New Model for Pricing Collateralized OTC Derivatives

2019 ◽  
Author(s):  
Tim Xiao
Keyword(s):  
Credit Risk ◽  
Empirical Evidence ◽  
Market Price ◽  
New Model ◽  
Otc Derivatives ◽  
Risk Measurements ◽  
The Impact ◽  
Unique Dataset

This paper presents a new model for pricing OTC derivatives subject to collateralization. It allows for collateral posting adhering to bankruptcy laws. As such, the model can back out the market price of a collateralized contract. This framework is very useful for valuing outstanding derivatives. Using a unique dataset, we find empirical evidence that credit risk alone is not overly important in determining credit-related spreads. Only accounting for both collateral arrangement and credit risk can sufficiently explain unsecured credit costs. This finding suggests that failure to properly account for collateralization may result in significant mispricing of derivatives. We also empirically gauge the impact of collateral agreements on risk measurements. Our findings indicate that there are important interactions between market and credit risk. https://arabixiv.org/b9vg8/download

scholarly journals A New Model for Pricing Collateralized OTC Derivatives

2019 ◽  
Author(s):  
Tim Xiao
Keyword(s):  
Credit Risk ◽  
Empirical Evidence ◽  
Market Price ◽  
New Model ◽  
Otc Derivatives ◽  
Risk Measurements ◽  
The Impact ◽  
Unique Dataset

ABSTRACTThis paper presents a new model for pricing OTC derivatives subject to collateralization. It allows for collateral posting adhering to bankruptcy laws. As such, the model can back out the market price of a collateralized contract. This framework is very useful for valuing outstanding derivatives. Using a unique dataset, we find empirical evidence that credit risk alone is not overly important in determining credit-related spreads. Only accounting for both collateral arrangement and credit risk can sufficiently explain unsecured credit costs. This finding suggests that failure to properly account for collateralization may result in significant mispricing of derivatives. We also empirically gauge the impact of collateral agreements on risk measurements. Our findings indicate that there are important interactions between market and credit risk. https://frenxiv.org/am8zy/download

scholarly journals A New Model for Pricing Collateralized OTC Derivatives

2019 ◽  
Author(s):  
Tim Xiao
Keyword(s):  
Credit Risk ◽  
Empirical Evidence ◽  
Market Price ◽  
New Model ◽  
Otc Derivatives ◽  
Risk Measurements ◽  
The Impact ◽  
Unique Dataset

This paper presents a new model for pricing OTC derivatives subject to collateralization. It allows for collateral posting adhering to bankruptcy laws. As such, the model can back out the market price of a collateralized contract. This framework is very useful for valuing outstanding derivatives. Using a unique dataset, we find empirical evidence that credit risk alone is not overly important in determining credit-related spreads. Only accounting for both collateral arrangement and credit risk can sufficiently explain unsecured credit costs. This finding suggests that failure to properly account for collateralization may result in significant mispricing of derivatives. We also empirically gauge the impact of collateral agreements on risk measurements. Our findings indicate that there are important interactions between market and credit risk.

scholarly journals Determinants Of Bank’s Profitability In EU15

2015 ◽  
Vol 62 (1) ◽  
pp. 93-101 ◽  
Author(s):  
Bogdan Căpraru ◽  
Iulian Ihnatov
Keyword(s):  
Credit Risk ◽  
Market Concentration ◽  
Negative Influence ◽  
Risk Indicators ◽  
Empirical Literature ◽  
Bank Profitability ◽  
Banking Systems ◽  
Net Interest Margin ◽  
The Impact ◽  
Interest Margin

Abstract In this paper we analyse determinants of bank profitability of EU15 banking systems for the period 2001-2011. We use as proxy for banks profitability the return on average assets (ROAA), the return on average equity (ROAE) and net interest margin (NIM). We also measure the impact of the first and the largest wave of enlargement (10 new members in 2004) on EU15 bank profitability, introducing a dummy variable. The contribution of this paper for the empirical literature is that there are no other studies that deal bank profitability for all EU 15 countries for the period considered (2001-2011). The literature splits the factors that influence banks’ profitability in two large groups: bank-specific (internal) factors and industry specific and macroeconomic (external) factors. Our results are in line with the economic theory. Cost to Income Ratio, credit risk and market concentration had a negative influence in case of all measures of banks’ profitability, while bank liquidity only for ROAE and NIM. The size of banks had a negative impact on NIM, suggesting that bigger the bank is, smaller the net interest margin ratio is, but, on the contrary, in case of ROAA, had a direct effect. The market concentration had a negative influence, meaning that the increasing competition, as a structural point of view, increases banks’ profitability. The results show us that the process of European Union enlargement from 2004 does not have significant impact on EU15 banking systems’ profitability. It has a week and negative effect only in case of net interest margin. As policy recommendations, we suggest for authorities a better supervision for credit risk and liquidity and maintaining a competitive banking environment. For banks’ management we also recommend to monitor the credit risk indicators, optimizing costs and diversifying the sources of income.

scholarly journals A New Model for Pricing Collateralized OTC Derivatives

2019 ◽  
Author(s):  
Tim Xiao
Keyword(s):  
Credit Risk ◽  
Empirical Evidence ◽  
Market Price ◽  
New Model ◽  
Otc Derivatives ◽  
Risk Measurements ◽  
The Impact ◽  
Unique Dataset

This paper presents a new model for pricing OTC derivatives subject to collateralization. It allows for collateral posting adhering to bankruptcy laws. As such, the model can back out the market price of a collateralized contract. This framework is very useful for valuing outstanding derivatives. Using a unique dataset, we find empirical evidence that credit risk alone is not overly important in determining credit-related spreads. Only accounting for both collateral arrangement and credit risk can sufficiently explain unsecured credit costs. This finding suggests that failure to properly account for collateralization may result in significant mispricing of derivatives. We also empirically gauge the impact of collateral agreements on risk measurements. Our findings indicate that there are important interactions between market and credit risk. https://osf.io/preprints/socarxiv/dh9mr/download

scholarly journals A New Model for Pricing Collateralized Financial Derivatives

2018 ◽  
Author(s):  
Tim Xiao
Keyword(s):  
Credit Risk ◽  
Empirical Evidence ◽  
Empirical Data ◽  
Market Price ◽  
Financial Derivatives ◽  
New Model ◽  
Risk Measurements ◽  
The Impact ◽  
Unique Dataset

This paper presents a new model for pricing financial derivatives subject to collateralization. It allows for collateral arrangements adhering to bankruptcy laws. As such, the model can back out the market price of a collateralized contract. This framework is very useful for valuing outstanding derivatives. Using a unique dataset, we find empirical evidence that credit risk alone is not overly important in determining credit-related spreads. Only accounting for both collateral posting and credit risk can sufficiently explain unsecured credit costs. This finding suggests that failure to properly account for collateralization may result in significant mispricing of derivatives. We also empirically gauge the impact of collateral agreements on risk measurements. Our findings indicate that there are important interactions between market and credit risk. Acknowledge: The empirical data were provided by FinPricing at http://www.finpricing.com/lib/IrSwap.html https://osf.io/preprints/socarxiv/fvdzh/download

scholarly journals A New Model for Pricing Collateralized OTC Derivatives

2019 ◽  
Author(s):  
Tim Xiao
Keyword(s):  
Credit Risk ◽  
Empirical Evidence ◽  
Market Price ◽  
New Model ◽  
Otc Derivatives ◽  
Risk Measurements ◽  
The Impact ◽  
Unique Dataset

This paper presents a new model for pricing OTC derivatives subject to collateralization. It allows for collateral posting adhering to bankruptcy laws. As such, the model can back out the market price of a collateralized contract. This framework is very useful for valuing outstanding derivatives. Using a unique dataset, we find empirical evidence that credit risk alone is not overly important in determining credit-related spreads. Only accounting for both collateral arrangement and credit risk can sufficiently explain unsecured credit costs. This finding suggests that failure to properly account for collateralization may result in significant mispricing of derivatives. We also empirically gauge the impact of collateral agreements on risk measurements. Our findings indicate that there are important interactions between market and credit risk. https://osf.io/preprints/lissa/y2wqc/download

scholarly journals A New Model for Pricing Collateralized OTC Derivatives

2019 ◽  
Author(s):  
Tim Xiao
Keyword(s):  
Credit Risk ◽  
Empirical Evidence ◽  
Market Price ◽  
New Model ◽  
Otc Derivatives ◽  
Risk Measurements ◽  
The Impact ◽  
Unique Dataset

This paper presents a new model for pricing OTC derivatives subject to collateralization. It allows for collateral posting adhering to bankruptcy laws. As such, the model can back out the market price of a collateralized contract. This framework is very useful for valuing outstanding derivatives. Using a unique dataset, we find empirical evidence that credit risk alone is not overly important in determining credit-related spreads. Only accounting for both collateral arrangement and credit risk can sufficiently explain unsecured credit costs. This finding suggests that failure to properly account for collateralization may result in significant mispricing of derivatives. We also empirically gauge the impact of collateral agreements on risk measurements. Our findings indicate that there are important interactions between market and credit risk.

scholarly journals Institutional quality and risk in the banking system

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Nguyen Phuc Canh ◽  
Christophe Schinckus ◽  
Thanh Dinh Su ◽  
Felicia Hui Ling Chong
Keyword(s):  
Credit Risk ◽  
Least Squares ◽  
Trade Openness ◽  
Banking System ◽  
Institutional Quality ◽  
Middle Income ◽  
Content Type ◽  
Banking Systems ◽  
System Risk ◽  
The Impact

Purpose This paper aims to offer an empirical study of the impact of institutional quality on the banking system risk and credit risk. Design/methodology/approach Applying cross-sectional dependent tests and stationary tests to check the property of our sample, the panel corrected standard errors model is recruited as the main estimator, while feasible generalized least squares, pool ordinary least squares (OLS), robust pool OLS and other estimators are used as a robustness check for an unbalanced panel data for 56 economies divided into three subsamples between 2002 and 2015. Findings The empirical results show several significant contributions. First, an improvement in institutional quality is an important factor to reduce the banking system risk. This effect of the institutions is less important in well-capitalized, highly profitable and in high-economic growth countries. This effect is also stronger in highly liquid banking systems. Notably, a better institutional quality helps to reduce the banking system risk in the highly concentrated banking system. Second, institutional quality has a significant negative relationship with the banking credit risk, especially in highly concentrated banking systems and in high-growth countries. This influence is weaker in highly liquid and well-capitalized banking systems. Finally, better institutions reduce the positive effect of trade openness, but it induces a higher credit risk for the banking system from the trade openness. Notably, a better institutional quality enhances the negative effect of foreign direct investment (FDI) inflow on both banking system risk and credit risk. These findings are documented for a global sample and three subsamples: low and lower-middle-income economies, upper-middle-income economies and high-income economies. Originality/value This study provides some recommendations, for policymakers, on the roles of institutions in the banking system and financial stability.

Sign in / Sign up

Export Citation Format

Share Document