scholarly journals Interest Rate and Foreign Exchange Risk Exposures of Australian Banks: A Note

2009 ◽  
Author(s):  
Abul F. M. Shamsuddin
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Stock Returns ◽  
Foreign Exchange ◽  
Exchange Rate Regime ◽  
Financial System ◽  
Flexible Exchange Rate ◽  
Risk Exposure ◽  
Exchange Risk ◽  
Exchange Rate Changes

The abolition of most government controls over the Australian financial system in the 1980s, the advent of a flexible exchange rate regime in 1983 and the globalisation of the financial system in the 1990s have created new opportunities for Australian banks but exposed them to new sources of risk. This study estimates systematic risk exposure of publicly listed Australian banks with respect to market, interest rate and foreign exchange rate using a GARCH-in-Mean model. Not surprisingly, the results suggest that nearly all banks exhibit varying degrees of market risk exposure. However, stock returns of large banks are highly sensitive to interest rate changes, while most small banks are almost immune to both interest and exchange rate changes.  

An Empirical Analysis of Foreign Exchange Exposure of CNX 100 Companies

GIS Business ◽  
2017 ◽  
Vol 12 (5) ◽  
pp. 1-9 ◽  
Author(s):  
Sriram Mahadevan
Keyword(s):  
Exchange Rate ◽  
Stock Returns ◽  
Foreign Exchange ◽  
Foreign Exchange Rate ◽  
Future Research ◽  
Export Ratio ◽  
Exchange Rate Exposure ◽  
Ratio Size ◽  
Foreign Exchange Exposure ◽  
Exchange Rate Changes

The present study has empirically examined the level of foreign exchange exposure and its determinants of CNX 100 companies. For the purpose of study, the relationship between exchange rate changes and stock returns for a sample of 82 companies was determined for the period April 2011-March 2016. The study finds that 49% of the sample companies had significant positive foreign exchange rate exposure and the found that the companies could be exporters or net importers. To explore factors determining foreign exchange rate exposure, variables such as export ratio, import ratio, size of a company, hedging activities were regressed against the exchange exposure and the study found that none of the factors was influencing the exchange rate exposure. The study concludes that the reasons for insignificant influence of the variables could be the natural hedging practices of companies, offsetting of exports and imports and heterogeneous of the sample size. The study offers few directions for future research in this area.

Emerging market currency risk exposure: evidence from South Africa

2020 ◽  
Vol 21 (2) ◽  
pp. 159-179
Author(s):  
Mashukudu Hartley Molele ◽  
Janine Mukuddem-Petersen
Keyword(s):  
South Africa ◽  
Exchange Rate ◽  
Foreign Exchange ◽  
Factor Model ◽  
Five Factor Model ◽  
Risk Exposure ◽  
Foreign Exchange Risk ◽  
Content Type ◽  
Exchange Risk ◽  
Three Factor

Purpose The purpose of this paper is to examine the level of foreign exchange exposure of listed nonfinancial firms in South Africa. The study spans the period January 2002 and November 2015. Foreign exchange risk exposure is estimated in relation to the exchange rate of the South African Rand relative to the US$, the Euro, the British Pound and the trade-weighted exchange rate index. Design/methodology/approach The study is based on the augmented-market model of Jorion (1990). The Jorion (1990) is a capital asset pricing model-inspired framework which models share returns as a function of the return on the market index and changes in the exchange rate factor. The market risk factor is meant to discount the effect of macroeconomic factors on share returns, thus isolating the foreign exchange risk factor. In addition, the study further added the size, value, momentum, investment and profitability risk factors in line with the Fama–French three-factor model, Carhart four-factor model and the Fama–French five-factor model to account for the fact that equity capital markets in countries such as South Africa are known to be partially segmented. Findings Foreign exchange risk exposure levels were estimated at more than 40% for all the proxy currencies on the basis of the standard augmented market model. However, after controlling for idiosyncratic factors, through the application of the Fama–French three-factor model, the Carhart four-factor model and the Fama–French five-factor model, exposure levels were found to range between 6.5 and 12%. Research limitations/implications These results indicate the importance of controlling for the effects of idiosyncratic facto0rs in the estimation of foreign exchange risk exposure in the context of emerging markets of Sub-Saharan Africa (SSA). Originality/value This is the first study to apply the Fama–French three-factor model, Carhart four-factor model and the Fama–French five-factor model in the estimation of foreign exchange exposure of nonfinancial firms in the context of a SSA country. These results indicate the importance of controlling for the effects of idiosyncratic factors in the estimation of foreign exchange risk exposure in the context of emerging markets.

scholarly journals The Interaction Between FX and Credit Risk as an Example of Intersection of Monetary and Financial Stability Policy Goals – The Case of Serbia

2016 ◽  
Vol 5 (2) ◽  
pp. 133-155
Author(s):  
Željko Jović
Keyword(s):  
Exchange Rate ◽  
Credit Risk ◽  
Exchange Rates ◽  
Foreign Exchange ◽  
Financial Stability ◽  
Financial System ◽  
Price Stability ◽  
Foreign Exchange Risk ◽  
Exchange Risk ◽  
The Impact

Abstract The financial system of Serbia is highly bank-centric and euroised, which is a common specific feature of financial systems in developing countries. High level of euroisation represents an adequate environment for the development of emphasized interaction of foreign exchange and credit risks; therefore, creation of the spillover mechanism of foreign exchange risk to credit risk is immanent for euroised systems. Although maintaining the stability of the dinar exchange rate is a secondary goal of the National Bank of Serbia in relation to price and financial stability as the primary goals, in terms of existence of the aforesaid spillover mechanism, maintaining stability of the dinar exchange rate represents the area where there is an interaction between the goals of monetary policy (price stability) and those of financial stability policy (maintaining and strengthening the financial system’s stability). In order to explore whether the spillover mechanism of foreign exchange risk to credit risk exists in Serbia’s financial system, the vector autoregressive (VAR) model is applied on data from the Serbian banking sector to quantify the impact of changes in the dinar exchange rates on the rate of non-performing loans (NPLs); the sample was formed in the period of increased instability of the dinar exchange rate, from 31 January 2008 to 31 December 2010. As we have quantitatively confirmed the impact of increase in the dinar exchange rate on the increase of 90-120 days past due NPLs, we can conclude that the existence of expressed interaction between foreign exchange risk and credit risk in the Serbian financial system represents a paradigm of the regulator’s need to achieve contemporary goals of monetary and financial stability policy by maintaining relative stability of the dinar exchange rates. Depreciation of the local currency has inflationary pressure on price stability and simultaneously influences the achievement of financial stability goals through the spillover mechanism of foreign exchange risk to credit risk. In addition to taking systematic measures to reduce the level of euroisation and introduce the specific regulatory requirements, in order to protect banks and clients from the dinar exchange rate volatility, the regulator faces extremely important task of maintaining relative stability of the dinar exchange rate as the instrument to simultaneous achievement of goals of monetary and financial stability policies.

scholarly journals Changes in Macroeconomic conditions and capital Return in Indonesia

2020 ◽  
Vol 11 (3) ◽  
pp. 320-328
Author(s):  
Andesta Selvi ◽  
Adam Mohammad ◽  
. Suhel
Keyword(s):  
Exchange Rate ◽  
Interest Rates ◽  
Stock Returns ◽  
Money Supply ◽  
Foreign Exchange ◽  
Capital Market ◽  
Company Performance ◽  
Foreign Exchange Reserves ◽  
Exchange Rate Changes ◽  
Investment Process

Purpose: this study aims to examine the influence of changes in inflation, changes in the rupiah exchange rate, changes in the money supply, changes in SBIS, changes in foreign exchange reserves and changes in interest rates on the return of Indonesian Islamic stocks.Methods: this study is focused on looking at conditions of macroeconomic changes that have an impact on the activity of the Islamic capital market, particularly on the return of Islamic stocks listed in the Jakarta Islamic Index. This empirical evidence is related to variable macroeconomic changes, namely changes in inflation, rupiah exchange rate, money supply, foreign exchange reserves, Indonesian Syariah Bank Certificates (SBIS) and interest rates on sharia stock returns for the period January 2014 – December 2019 obtained from Financial publications. Service Authority (OJK) and Bank Indonesia. The analysis technique used is quantitative analysis using multiple regression analysis tools.Results: the results of this study are (1) Variable Changes in Inflation, Changes in the Amount of Money Supply, Changes in Foreign Exchange Reserves, Changes in SBIS have a positive and significant effect on Stock Returns listed on the Jakarta Islamic Index, (2) changes in exchange rates have a negative and significant effect on Stock Returns listed in Jakarta Islamic. Index, (3) the Interest Rate variable has no effect on Stock Returns listed on the Jakarta Islamic Index.Conclusions and Relevance: the approach used by each variable starts with the conventional followed by the study of Islamic macroeconomics, in order to provide a philosophy of science and economics that refers to Baqir Sadr in the Iqtishaduna book. In this study, researchers examined macroeconomic variables on sharia stock returns to prioritize people's welfare and pay close attention to every investment process based on sharia principles. Therefore the public, entrepreneurs, investors and company performance must pay attention to information regarding changes in inflation, changes in the rupiah exchange rate, changes in the money supply, changes in Bank Indonesia Sharia Certificates (SBIS), changes foreign exchange reserves, and changes in interest rates in order to minimize risks for both investors and entrepreneurs. This variable can affect the movement of the capital market so that the return on Islamic stocks also has an effect.

FINANCIAL RISKS OF MICROFINANCIAL ORGANIZATIONS (FOREIGN EXPERIENCE)

2021 ◽  
Vol 2 (11) ◽  
pp. 48-62
Author(s):  
Viktor V. Erokhin ◽  
Keyword(s):  
Interest Rate ◽  
Foreign Exchange ◽  
Legal Status ◽  
Interest Rate Risk ◽  
Risk Exposure ◽  
Financial Risks ◽  
Microfinance Institutions ◽  
Foreign Exchange Risk ◽  
High Interest Rate ◽  
Exchange Risk

New ideas make it clear that attempts by the international community to support microfinance institutions and provide them with borrowers do not always take into account the most serious financial risks of lenders. This study examines the exposure of microfinance institutions to liquidity, interest rate and foreign exchange (FX) risks. Analyzing data from financial statements of microfinance institutions, it can be concluded that the microfinance sector faces minimal liquidity risk, high interest rate risk and lower than commonly as-sumed foreign exchange risk. Linking risk exposure to institutional characteristics, the data show that legal status and regional affiliation correlate with risk exposure, but regulatory quality does not. The results indicate that the lender community may not expect great benefits from expanding the array of ongoing measures from credit market regulators to mitigate liquidity or foreign exchange risk.

scholarly journals PENGARUH RISIKO INFLASI, RISIKO SUKU BUNGA, RISIKO VALUTA ASING TERHADAP RETURN SAHAM

SIMAK ◽  
2021 ◽  
Vol 19 (01) ◽  
pp. 52-68
Author(s):  
Olivia Luthfiah Mufida ◽  
Gusganda Suria Manda
Keyword(s):  
Interest Rate ◽  
Stock Returns ◽  
Foreign Exchange ◽  
Interest Rate Risk ◽  
Negative Influence ◽  
Foreign Exchange Risk ◽  
Inflation Risk ◽  
Rate Risk ◽  
Exchange Risk ◽  
The Relationship

This research was conducted to show the importance of company managers in managing stock returns during inflation, increases in interest rates, and increases in foreign exchange rates. The purpose of this study is to analyze the effect of inflation risk, interest rate risk, and foreign exchange risk on stock returns, 2012-2019 study period. The method in this research is using multiple linear regression analysis. Techniques in conducting this research using quantitative descriptive analysis and obtained 8 companies as research samples. The results of this study indicate that inflation risk has an insignificant effect and the relationship is partially positive influence on stock returns, interest rate risk has no significant effect and partially negative influence on stock returns, foreign exchange risk has a significant effect and the relationship is negative influence significantly partial to stock returns. This research is inseparable from the limitations of the researcher. For investors and potential investors who want to invest, it is better if they pay more attention to the company's financial condition so that investors can find out whether it is feasible or not to invest in the chosen company so that investors do not experience losses.

scholarly journals Interest Rate Policy and Exchange Rates Volatility Lessons from Indonesia

2020 ◽  
Vol 9 (2) ◽  
pp. 19-42
Author(s):  
Haryo Kuncoro
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Exchange Rates ◽  
Inflation Targeting ◽  
Exchange Rate Regime ◽  
Exchange Rate Volatility ◽  
Flexible Exchange Rate ◽  
Interest Rate Policy ◽  
Rate Policy ◽  
Exchange Rates Volatility

AbstractWhether or not inflation targeting adoption leads to increased volatility of exchange rates is controversial. The volatility increases with inflation targeting as a result of the flexible exchange rate regime. Others argue that inflation targeting delivers the best outcomes in terms of lower exchange rate volatility. The purpose of this paper is to investigate whether interest rate policy in inflation targeting frameworks – that is subjected to control inflation rate – may reduce the volatility of exchange rates. To test the hypothesis, we use monthly data in the case of Indonesia over the period 2005(7)-2016(7). Several control variables are introduced in the regressions. The result of the autoregressive distributed lag model proves the interest rate policy and foreign exchange intervention fail to reduce the exchange rates volatility. It seems inflation targeting in Indonesia puts too much emphasis on stabilizing the domestic currency thus leading to benign neglect of stabilizing its external value, ultimately resulting in increased exchange rate volatility. These findings suggest that central bank credibility plays an important role in conducting inflation targeting policy which operates primarily through a signalling effect.

scholarly journals Changes in Macroeconomic Conditions and Capital Return in Indonesia

2020 ◽  
Vol 23 (1) ◽  
pp. 187-193
Author(s):  
Andesta Selvi ◽  
◽  
Adam Mohamad ◽  
Feunsri Suhel ◽  
◽  
...  
Keyword(s):  
Exchange Rate ◽  
Interest Rates ◽  
Stock Returns ◽  
Money Supply ◽  
Foreign Exchange ◽  
Capital Market ◽  
Company Performance ◽  
Foreign Exchange Reserves ◽  
Exchange Rate Changes ◽  
Investment Process

Abstract. This study is focused on looking at conditions of macroeconomic changes that have an impact on the activity of the Islamic capital market, particularly on the return of Islamic stocks listed in the Jakarta Islamic Index. This empirical evidence is related to variable macroeconomic changes, namely changes in inflation, rupiah exchange rate, money supply, foreign exchange reserves, Indonesian Syariah Bank Certificates (SBIS) and interest rates on sharia stock returns for the period January 2014-December 2019 obtained from Financial publications. Service Authority (OJK) and Bank Indonesia. The analysis technique used is quantitative analysis using multiple regression analysis tools. Purpose. This study aims to examine the influence of changes in inflation, changes in the rupiah exchange rate, changes in the money supply, changes in SBIS, changes in foreign exchange reserves and changes in interest rates on the return of Indonesian Islamic stocks. Results. The results of this study are (1) Variable Changes in Inflation, Changes in the Amount of Money Supply, Changes in Foreign Exchange Reserves, Changes in SBIS have a positive and significant effect on Stock Returns listed on the Jakarta Islamic Index, (2) changes in exchange rates have a negative and significant effect on Stock Returns listed in Jakarta Islamic. Index, (3) the Interest Rate variable has no effect on Stock Returns listed on the Jakarta Islamic Index. Conclusion. The approach used by each variable starts with the conventional followed by the study of Islamic macroeconomics, in order to provide a philosophy of science and economics that refers to Baqir Sadr in the Iqtishaduna book. In this study, researchers examined macroeconomic variables on sharia stock returns to prioritize people’s welfare and pay close attention to every investment process based on sharia principles. Therefore the public, entrepreneurs, investors and company performance must pay attention to information regarding changes in inflation, changes in the rupiah exchange rate, changes in the money supply, changes in Bank Indonesia Sharia Certificates (SBIS), changes foreign exchange reserves, and changes in interest rates in order to minimize risks for both investors and entrepreneurs. This variable can affect the movement of the capital market so that the return on Islamic stocks also has an effect. Keywords: Stock Return; Inflation Change; Rupiah Exchange Rate; Change in Amount of Money Supply; Change in Bank Indonesia Sharia Certificate; Change in Foreign Exchange Reserves; and Change in Interest Rates.

scholarly journals Effect of operational and market risk exposures on financial performance of DT-Saccos in Kenya

2021 ◽  
Vol 10 (5) ◽  
pp. 107-118
Author(s):  
Sisimonda Kinya Mwanja
Keyword(s):  
Interest Rate ◽  
Financial Performance ◽  
Foreign Exchange ◽  
Market Risk ◽  
Interest Rate Risk ◽  
Risk Exposure ◽  
Operating Efficiency ◽  
Operating Expense ◽  
Rate Risk ◽  
Exchange Risk

The main aim of the investigation was to analyze the effect of operational and market risk exposures on the financial performance of DT-SACCOs in Kenya. The specific objectives of the study were to; assess the effect of operating expense risk exposure on the financial performance of DT-SACCOs in Kenya; To establish the effect of operation efficiency risk exposure on the financial performance of DT-SACCOs in Kenya; Effect of interest rate risk exposure on the financial performance of DT-SACCOs in Kenya; Effect of foreign exchange rate risk exposure on the financial performance of DT-SACCOs in Kenya. Effect of operational and market risk exposure on the financial performance of DT-SACCOs in Kenya. The study used panel data between the years 2010-2019 which was 10 years period. The results revealed that at both bivariate and multivariate regression operating expense risk, operating efficiency and foreign exchange risk exposure had a significant effect on the financial performance of DT-SACCOs in Kenya. Only interest rate risk exposure did not have a significant effect on the financial performance of DT-SACCOs in Kenya.

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