scholarly journals A Multi-Objective Risk Return Trade off Models for Banks: Fuzzy Programming Approach

2021 ◽  
Vol 8 (2) ◽  
pp. 179-188
Author(s):  
Rahul Chaudhury ◽  
Sahidul Islam
Keyword(s):  
Interest Rate ◽  
Banking Sector ◽  
Balance Sheet ◽  
Liquidity Risk ◽  
Market Value ◽  
Fuzzy Programming ◽  
Interest Rate Risk ◽  
Programming Approach ◽  
Multi Objective ◽  
Rate Risk

The main focus of banking sector is on the risk management. Asset liability management (ALM) is one of the key processes to manage the risks. The objective of this paper is to develop a multi-objective asset liability optimization model for banks with the maximization of market value of equity and minimization of duration gap as the objective function. Several liquidity ratios, concept of duration and convexity are considered to manage the risk properly. Interest rate risk and liquidity risk are two major considerations in both the regulation and management of a bank. As we know that, with the fluctuation of the market interest rate, the market value of assets and liabilities of a bank changes and that affects a change in owner’s equity. In order to overcome such type of situation here we will use the concept of duration and convexity to manage the interest rate risk. In case of liquidity risk the shortage of liquidity may also put that bank in risk and simultaneously it is very crucial to manage the cash flow properly. So here we will use some major liquidity ratios to manage the liquidity risk. We will take the help of fuzzy programming technique to solve our model properly. A numerical example is given to illustrate our model by considering a hypothetical bank balance sheet. Also we will compare the result obtained by fuzzy technique with result obtained by a non fuzzy based technique.

scholarly journals Who Bears Interest Rate Risk?

2018 ◽  
Vol 32 (8) ◽  
pp. 2921-2954 ◽  
Author(s):  
Peter Hoffmann ◽  
Sam Langfield ◽  
Federico Pierobon ◽  
Guillaume Vuillemey
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Banking Sector ◽  
Balance Sheet ◽  
Interest Rate Risk ◽  
Cross Sectional ◽  
Net Worth ◽  
Loan Rate ◽  
Rate Risk ◽  
European Banking

Abstract We study the allocation of interest rate risk within the European banking sector using novel data. Banks’ exposure to interest rate risk is small on aggregate, but heterogeneous in the cross-section. Contrary to conventional wisdom, net worth is increasing in interest rates for approximately half of the institutions in our sample. Cross-sectional variation in banks’ exposures is driven by cross-country differences in loan-rate fixation conventions for mortgages. Banks use derivatives to partially hedge on-balance-sheet exposures. Residual exposures imply that changes in interest rates have redistributive effects within the banking sector. Received October 31, 2017; editorial decision August 30, 2018 by Editor Philip Strahan. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

scholarly journals The Effect of Risks on Banking Safety: Applied Study on Jordanian Traditional Banks (2005-2016)

2017 ◽  
Vol 9 (9) ◽  
pp. 102
Author(s):  
Mohammad Abdel Mohsen Al-Afeef ◽  
Atallah Hassan Al-Ta'ani
Keyword(s):  
Interest Rate ◽  
Credit Risk ◽  
Commercial Banks ◽  
Banking Sector ◽  
Liquidity Risk ◽  
Interest Rate Risk ◽  
Bank Credit ◽  
Applied Study ◽  
Rate Risk ◽  
The Impact

Banking sector is one of the most important sectors that support the sustainable economic development in Jordan, therefore this study aimed to test the impact of risks; (Liquidity risk, bank credit risk and interest rate risk) on the safety in the banking sector in the Jordanian commercial banks during the period 2005-2016.The results of the study showed that there is a statistically significant impact for each of liquidity risk and interest rate risk on the safety in the banking sector, and there isn't statistically significant impact for credit risk on the safety in the banking sector during the period of this study, and also find that the explanatory of model was 60.5%, which means that 39.5% due to other factors.

scholarly journals Critical Role of Risk Management and its Impact on Bank Performance in Pakistan

2021 ◽  
Vol 4 (1) ◽  
pp. 1-11
Author(s):  
DR.NISBAT ALI ◽  
DR. MUHAMMAD MAJID MAHMOOD BAGRAM ◽  
HAIDAR ALI
Keyword(s):  
Risk Management ◽  
Interest Rate ◽  
Banking Sector ◽  
Liquidity Risk ◽  
Operational Risk ◽  
Interest Rate Risk ◽  
Capital Adequacy ◽  
Rate Risk ◽  
Capital Adequacy Ratio ◽  
Key Drivers

Risk management is most important factor to exist and survive for the financial industry. The major bankruptcies which incurred of ERON and Lehman-Brothers this arises the awareness about the appropriate risk management procedure in banking sectors. Our study analyze the various risk which can affect on banking operation in Pakistan and this study also include the effect of risk management on the performance of the large banking sector as well as small banking sectors in Pakistan. This study uses capital adequacy ratio, non performing loans, interest rate risk, liquidity risk and operational risk for the risk management. The data is taken from the published annual report of the commercial banks from 2005 to 2015. Descriptive statistics, correlation matrix and regression analysis use to analyze the data. This study leads to conclusion is that the better risk management system leads to the better performance of the banks. It’s also conclude that capital adequacy ratio, non performing loans, interest rate risk, liquidity risk and operational risk that are key drivers of the profitability for the large banking sector of Pakistan. It’s also tell us that only capital adequacy ratio and non performing loans are the key drivers of small banking sectors in Pakistan.

Balance-sheet interest rate risk: a weighted Lp approach

2018 ◽  
Vol 21 (1) ◽  
pp. 91-104 ◽  
Author(s):  
Leslaw Gajek ◽  
Elzbieta Krajewska
Keyword(s):  
Interest Rate ◽  
Balance Sheet ◽  
Interest Rate Risk ◽  
Rate Risk

Synthesis and Conclusion

2019 ◽  
pp. 443-458
Author(s):  
Alan N. Rechtschaffen
Keyword(s):  
Civil War ◽  
Interest Rate ◽  
Liquidity Risk ◽  
Market Risk ◽  
Interest Rate Risk ◽  
Securities And Exchange Commission ◽  
Confederate States Of America ◽  
Rate Risk ◽  
National Bank

This chapter begins with a synthesis of key themes, covering derivatives, debt instruments, and structured notes. It considers the case study Securities and Exchange Commission v. Goldman, Sachs & Co. & Fabrice Tourre. It then describes the Erlanger “cotton” bonds issued by the Confederate States of America to raise money during the Civil War. This is followed by discussions on range notes, internal leverage and market risk, and risks (interest rate risk, liquidity risk, reinvestment risk). The chapter concludes by describing the bulletin issued by the Office of the Comptroller of the Currency on May 22, 2002, to all national bank CEOs and all federal branches and agencies in regard to risky “yield-chasing” strategies that were returning to the markets.

The market value and dynamic interest rate risk of swaps

2004 ◽  
pp. 199-239 ◽  
Author(s):  
Andrew H. Chen ◽  
Mohammed M. Chaudhury
Keyword(s):  
Interest Rate ◽  
Market Value ◽  
Interest Rate Risk ◽  
Rate Risk

scholarly journals A modelling process of short-term interest rate risk management for the South African commercial banking sector

2011 ◽  
Vol 9 (1) ◽  
pp. 628-637
Author(s):  
Jiaqi Sun ◽  
J.H. Van Rooyen
Keyword(s):  
Interest Rate ◽  
South African ◽  
Inflation Targeting ◽  
Banking Sector ◽  
Empirical Finding ◽  
Interest Rate Risk ◽  
Commercial Banking ◽  
The South ◽  
Short Term ◽  
Rate Risk

This study focuses on banking book interest rate risk (IRR) management, more specifically short-term IRR management (SIRR). This type of risk is partly induced by the inflation targeting policy of the South African Reserve Bank (SARB). As a result, inflation leads to an uncertain interest rate cycle and a period of uncertain interest rate levels as it relates to lending and borrowing activities in the South African commercial banking sector. This study highlights what causes short-term interest rate risk and how the banks may forecast and manage the SIRR with reference to the inflation targeting policy. The banking industry manages a high volume of fund transactions and portfolios of investments. The banks are intricately involved in the financial markets and are therefore exposed to a large number of risk factors. A sound banking system is an important prerequisite for a country’s future economic development. One key empirical finding of this research is that 50 per cent of the South African banks agree that loans that cannot undergo immediate rate adjustments are exposed to the repo-rate adjustment after the Monetary Policy Committee (MPC) meeting. Banks surveyed see the need for the development of a short-term interest rate risk (SIRR) management process to better control such repo-rate risk. The next key empirical finding is that interest rate risk is still managed via traditional repricing gap and sensitivity analysis which is not ideal for risk management due to inherent weaknesses (such as not quantifying capital risk exposure). This agrees with the Pricewaterhousecoopers Balance Sheet Management benchmark survey

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