scholarly journals DYNAMIC BALANCE SHEET MODEL WITH LIQUIDITY RISK

2016 ◽  
Vol 19 (07) ◽  
pp. 1650052 ◽  
Author(s):  
GRZEGORZ HAŁAJ
Keyword(s):  
Policy Analysis ◽  
Portfolio Choice ◽  
Default Risk ◽  
Dynamic Balance ◽  
Balance Sheet ◽  
Liquidity Risk ◽  
Solvency Regulation ◽  
Optimal Balance ◽  
Shed Light ◽  
Prudential Policy

Theoretically optimal responses of banks to various liquidity and solvency shocks are modeled. The proposed framework is based on a risk-adjusted return portfolio choice in multiple periods subject to the default risk related either to liquidity or solvency problems. Performance of the model and sensitivity of optimal balance sheet structures to some key parameters of the model are illustrated in a specific calibrated setup. The results of the simulations shed light on the effectiveness of the liquidity and solvency regulation. The flexible implementation of the model and its semi-analytical solvability allows for various easy applications of the framework for the macro-prudential policy analysis.

LIQUIDITY RISK, INSTEAD OF FUNDING COSTS, LEADS TO A VALUATION ADJUSTMENT FOR DERIVATIVES AND OTHER ASSETS

2015 ◽  
Vol 18 (02) ◽  
pp. 1550014 ◽  
Author(s):  
BERT-JAN NAUTA
Keyword(s):  
Default Risk ◽  
Balance Sheet ◽  
Liquidity Risk ◽  
New Model ◽  
The Cost ◽  
Debt Valuation ◽  
Illiquid Assets

Traditionally derivatives have been valued in isolation. The balance sheet of which a derivative position is part, was not included in the valuation. Recently however, aspects of the valuation have been revised to incorporate certain elements of the balance sheet. Examples are the debt valuation adjustment which incorporates default risk of the bank holding the derivative, and the funding valuation adjustment that some authors have proposed to include the cost of funding into the valuation. This paper investigates the valuation of derivatives as part of a balance sheet. In particular, the paper considers funding costs, default risk and liquidity risk. A valuation framework is developed under the elastic funding assumption. This assumption states that funding costs reflect the quality of the assets, and any change in asset composition is immediately reflected in the funding costs. The result is that funding costs should not affect the value of derivatives. Furthermore, a new model for pricing liquidity risk is described. The paper highlights that the liquidity spread, used for discounting cashflows of illiquid assets, should be expressed in terms of the liquidation value (LV) of the asset, and the probability that the institution holding the asset needs to liquidate its assets.

Rating Agency Adjustments to GAAP Financial Statements and Their Effect on Ratings and Credit Spreads

2014 ◽  
Vol 90 (2) ◽  
pp. 641-674 ◽  
Author(s):  
Pepa Kraft
Keyword(s):  
Default Risk ◽  
Credit Rating ◽  
Credit Ratings ◽  
Balance Sheet ◽  
Financial Statements ◽  
Financial Statement ◽  
Credit Spread ◽  
Credit Spreads ◽  
Term Structures ◽  
Interest Expense

ABSTRACT I examine a dataset of both quantitative (hard) adjustments to firms' reported U.S. GAAP financial statement numbers and qualitative (soft) adjustments to firms' credit ratings that Moody's develops and uses in its credit rating process. I first document differences between firms' reported and Moody's adjusted numbers that are both large and frequent across firms. For example, primarily because of upward adjustments to interest expense and debt attributable to firms' off-balance sheet debt, on average, adjusted coverage (cash flow-to-debt) ratios are 27 percent (8 percent) lower and adjusted leverage ratios are 70 percent higher than the corresponding U.S. GAAP ratios. I then find that Moody's hard and soft rating adjustments are associated with significantly higher credit spreads and flatter credit spread term structures. Overall, the results indicate that Moody's quantitative adjustments to financial statement numbers and qualitative adjustments to credit ratings enable it to better capture default risk, consistent with it effectively processing both hard and soft information.

GASB No. 34's Governmental Financial Reporting Model: Evidence on Its Information Relevance

2007 ◽  
Vol 82 (1) ◽  
pp. 205-240 ◽  
Author(s):  
Elizabeth Plummer ◽  
Paul D. Hutchison ◽  
Terry K. Patton
Keyword(s):  
School Districts ◽  
Financial Reporting ◽  
Default Risk ◽  
Balance Sheet ◽  
Cash Flows ◽  
Working Capital ◽  
Information Relevance ◽  
Net Assets ◽  
Accrual Basis ◽  
The Government

This study uses a sample of 530 Texas school districts to investigate the information relevance of governmental financial statements published under Governmental Accounting Standards Board Statement No. 34 (GASB No. 34). Specifically, we examine whether the new government-wide statements provide information relevant for assessing a government's default risk, and if this information is incremental to that provided by the governmental funds statements. GASB No. 34 requires governments to publish governmental funds statements prepared on a modified accrual basis, and government-wide statements prepared on an accrual basis. We find that GASB No. 34's Statement of Net Assets (similar to a corporation's balance sheet) provides information relevant for assessing default risk, and this information is incremental to that provided by the governmental funds statements. However, GASB No. 34's Statement of Activities (similar to a corporation's income statement) does not provide information relevant for assessing default risk. The accrual “earnings” measure is not more informative than the modified-accrual “earnings” measure. A government's modified accrual earnings measure can be thought of as a type of measure of changes in working capital. Therefore, our results are consistent with research on corporate entities that attributes the superiority of earnings over cash flows primarily to working capital accruals and not long-term accruals. For our sample of school districts, evidence suggests that total net assets from the government-wide Statement of Net Assets, along with a measure of modified-accrual “earnings” from the governmental funds statement, provide the best information for explaining default risk.

scholarly journals Neural crest-derived neurons are replaced by a newly identified mesodermal lineage in the post-natal and aging enteric nervous system

2020 ◽  
Author(s):  
Subhash Kulkarni ◽  
Monalee Saha ◽  
Laren Becker ◽  
Zhuolun Wang ◽  
Guosheng Liu ◽  
...  
Keyword(s):  
Nervous System ◽  
Neural Crest ◽  
Enteric Nervous System ◽  
Dynamic Balance ◽  
Intestinal Function ◽  
Dominant Form ◽  
Prevailing Paradigm ◽  
Optimal Balance ◽  
Systemic Health ◽  
Mesodermal Lineage

ABSTRACTThe enteric nervous system (ENS), a collection of neurons contained in the wall of the gut, is of fundamental importance to gastrointestinal and systemic health. According to the prevailing paradigm, the ENS arises from progenitor cells migrating from the embryonic neural crest and remains largely unchanged thereafter. Here, we show that the composition of maturing ENS changes with time, with a decline in neural-crest derived neurons and their replacement by mesoderm-derived neurons. Single cell transcriptomics and immunochemical approaches establish a distinct expression profile of mesoderm-derived neurons. The dynamic balance between the proportions of neurons from these two different lineages in the post-natal gut is dependent on the availability of their respective trophic signals, GDNF-RET and HGF-MET. With increasing age, the mesoderm-derived neurons become the dominant form of neurons in the ENS, a change associated with significant functional effects on intestinal motility. Normal intestinal function in the adult gastrointestinal tract therefore appears to require an optimal balance between these two distinct lineages within the ENS.

FUNDAMENTAL PROBLEMS OF INVESTMENT FUNDS IN UKRAINE FROM THE POINT OF VIEW OF COMPLEMENTARY PENSION PROVISION OF CITIZENS

2021 ◽  
Vol 298 (5 Part 1) ◽  
pp. 57-62
Author(s):  
Illia Morhachov ◽  
Keyword(s):  
Capital Accumulation ◽  
Pension System ◽  
Fundamental Problem ◽  
Balance Sheet ◽  
Point Of View ◽  
Investment Fund ◽  
Investment Funds ◽  
Optimal Balance ◽  
Sheet Structure ◽  
Balance Structure

The relevance and urgent need for the formation of complementary pension provision for the population in Ukraine has been determined. The complementary pension provision of the citizens of the country is considered as not at all implying the complete destruction of the existing solidarity pension system, but only the formation of additional mechanisms that make the pension provision of citizens generally successful even in the existing conditions. Such a mechanism can be a set of investment funds (joint investment institutions) in the country, which will add to the existing solidarity pension system elements of capital accumulation through the activation of investment processes. The purpose of the work was to determine the fundamental problems and prospects of Ukrainian investment funds (joint investment institutions) from the point of view of complementary pension provision for citizens in Ukraine. The purpose of the work was to determine the fundamental problems and prospects of Ukrainian investment funds (joint investment institutions) from the point of view of complementary pension provision for citizens in Ukraine. The article defines that the prerequisite for effective complementary provision is the optimal balance structure, which is similar to such better analogues as the Berkshire Hathaway and the Vanguard S & P 500 ETF. It is specified that the formation of a balance sheet structure in accordance with the best foreign analogues contradicts the current regulatory framework in the country, which is a fundamental problem in the formation of complementary pension provision on the basis of joint investment institutions. It is determined that the majority of investment funds existing in Ukraine in the form of joint investment institutions (ISI) under the current legislation are not able to provide a complementary pension for citizens of the country at a sufficient level of efficiency due to the impossibility of forming an optimal asset structure. The fundamental problem of ISI in the country is the legislative restrictions on the formation of the optimal structure of their balance. The optimal balance sheet structure of the investment fund, in particular assets (dominated by shares of the world’s leading companies) and liabilities (dominated by equity and raised funds by issuing bonds) is the basis for the effectiveness of complementary pension provision.

Foreign Ownership and Bank Efficiency

2014 ◽  
pp. 75-100
Author(s):  
Özlem Olgu ◽  
Emrah Yılmaz
Keyword(s):  
Banking Sector ◽  
Relevant Literature ◽  
Balance Sheet ◽  
Data Envelopment ◽  
Bank Efficiency ◽  
Financial Ratio ◽  
Second Stage ◽  
Financial Ratio Analysis ◽  
The Relationship ◽  
Shed Light

This chapter examines the association between Foreign Direct Investment (FDI) and efficiency of commercial banks in Turkey during the 2003-2010 period. First, the authors examine the technical efficiency of banks by applying the Data Envelopment Analysis (DEA) and financial ratio analysis following the relevant literature. Then, they attempt to shed light on the relationship between FDI and bank efficiency applying a second stage regression analysis. The results indicate that banks that have received FDI are more efficient than others whilst there is no significant correlation among the FDI dummy and bank efficiency in Turkey. Moreover, the analysis of balance sheet ratios suggests that foreign investors target more profitable and larger banks in the sector to form partnerships. Thus, consistent with Berger et al. (2003), the authors propose that efficiency is a pre-condition rather than a result of FDI in the Turkish banking sector.

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