Risk Taking And Interest Rates

Author : Seung Jung Lee,Lucy Qian Liu,Viktors Stebunovs
Publisher : International Monetary Fund
Page : 47 pages
File Size : 49,9 Mb
Release : 2017-01-27
Category : Business & Economics
ISBN : 9781475572377

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Risk Taking and Interest Rates by Seung Jung Lee,Lucy Qian Liu,Viktors Stebunovs Pdf

We study how low interest rates in the United States affect risk taking in the market of crossborder leveraged corporate loans. To the extent that actions of the Federal Reserve affect U.S. interest rates, our analysis provides evidence of a cross-border spillover effect of monetary policy. We find that before the crisis, lenders made ex-ante riskier loans to non- U.S. borrowers in response to a decline in short-term U.S. interest rates, and, after it, in response to a decline in longer-term U.S. interest rates. Economic uncertainty and risk appetite appear to play a limited role in explaining ex-ante credit risk. Our results highlight the potential policy challenges faced by central banks in affecting credit risk cycles in their own jurisdictions.

Author : Mr.Ralph Chami,Mr.Thomas F. Cosimano,Ms.Celine Rochon,Julieta Yung
Publisher : International Monetary Fund
Page : 26 pages
File Size : 47,5 Mb
Release : 2020-03-13
Category : Business & Economics
ISBN : 9781513531861

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Riding the Yield Curve: Risk Taking Behavior in a Low Interest Rate Environment by Mr.Ralph Chami,Mr.Thomas F. Cosimano,Ms.Celine Rochon,Julieta Yung Pdf

Investors seek to hedge against interest rate risk by taking long or short positions on bonds of different maturities. We study changes in risk taking behavior in a low interest rate environment by estimating a market stochastic discount factor that is non-linear and therefore consistent with the empirical properties of cashflow valuations identified in the literature. We provide evidence that non-linearities arise from hedging strategies of investors exposed to interest rate risk. Capital losses are amplified when interest rates increase and risk averse investors have taken positions on instruments with longer maturity, expecting instead interest rates to revert back to their historical average.

Author : Anonim
Publisher : Lulu.com
Page : 294 pages
File Size : 43,7 Mb
Release : 2004
Category : Bank capital
ISBN : 9789291316694

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International Convergence of Capital Measurement and Capital Standards by Anonim Pdf

Author : Beata Lubinska
Publisher : John Wiley & Sons
Page : 263 pages
File Size : 54,7 Mb
Release : 2021-11-01
Category : Business & Economics
ISBN : 9781119755012

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Interest Rate Risk in the Banking Book by Beata Lubinska Pdf

Introduces practical approaches for optimizing management and hedging of Interest Rate Risk in the Banking Book (IRRBB) driven by fast evolving regulatory landscape and market expectations. Interest rate risk in the banking book (IRRBB) gained its importance through the regulatory requirements that have been growing and guiding the banking industry for the last couple of years. The importance of IRRBB is shifting for banks, away from ‘just’ a regulatory requirement to having an impact on the overall profitability of a financial institution. Interest Rate Risk in the Banking Book sheds light on the best practices for managing this importance risk category and provides detailed analysis of the hedging strategies, practical examples, and case studies based on the author’s experience. This handbook is rich in practical insights on methodological approach and contents of ALCO report, IRRBB policy, ICAAP, Risk Appetite Statement (RAS) and model documentation. It is intended for the Treasury, Risk and Finance department and is helpful in improving and optimizing their IRRBB framework and strategy. By the end of this IRRBB journey, the reader will be equipped with all the necessary tools to build a proactive and compliant framework within a financial institution. Gain an updated understanding of the evolving regulatory landscape for IRRBB Learn to apply maturity gap analysis, sensitivity analysis, and the hedging strategy in banking contexts • Understand how customer behavior impacts interest rate risk and how to manage the consequences Examine case studies illustrating key IRRBB exposures and their implications Written by London market risk expert Beata Lubinska, Interest Rate Risk in the Banking Book is the authoritative resource on this evolving topic.

Author : Mr.Giovanni Dell'Ariccia,Mr.Luc Laeven,Mr.Gustavo Suarez
Publisher : International Monetary Fund
Page : 41 pages
File Size : 40,6 Mb
Release : 2013-06-06
Category : Business & Economics
ISBN : 9781484381137

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Bank Leverage and Monetary Policy's Risk-Taking Channel by Mr.Giovanni Dell'Ariccia,Mr.Luc Laeven,Mr.Gustavo Suarez Pdf

We present evidence of a risk-taking channel of monetary policy for the U.S. banking system. We use confidential data on the internal ratings of U.S. banks on loans to businesses over the period 1997 to 2011 from the Federal Reserve’s survey of terms of business lending. We find that ex-ante risk taking by banks (as measured by the risk rating of the bank’s loan portfolio) is negatively associated with increases in short-term policy interest rates. This relationship is less pronounced for banks with relatively low capital or during periods when banks’ capital erodes, such as episodes of financial and economic distress. These results contribute to the ongoing debate on the role of monetary policy in financial stability and suggest that monetary policy has a bearing on the riskiness of banks and financial stability more generally.

Author : Natalya Martynova,Mr.Lev Ratnovski,Mr.Razvan Vlahu
Publisher : International Monetary Fund
Page : 44 pages
File Size : 50,8 Mb
Release : 2015-11-25
Category : Business & Economics
ISBN : 9781513517582

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Bank Profitability and Risk-Taking by Natalya Martynova,Mr.Lev Ratnovski,Mr.Razvan Vlahu Pdf

Traditional theory suggests that more profitable banks should have lower risk-taking incentives. Then why did many profitable banks choose to invest in untested financial instruments before the crisis, realizing significant losses? We attempt to reconcile theory and evidence. In our setup, banks are endowed with a fixed core business. They take risk by levering up to engage in risky ‘side activities’(such as market-based investments) alongside the core business. A more profitable core business allows a bank to borrow more and take side risks on a larger scale, offsetting lower incentives to take risk of given size. Consequently, more profitable banks may have higher risk-taking incentives. The framework is consistent with cross-sectional patterns of bank risk-taking in the run up to the recent financial crisis.

Author : Brian Coyle
Publisher : Global Professional Publishi
Page : 156 pages
File Size : 44,7 Mb
Release : 2001
Category : Business & Economics
ISBN : 0852974396

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Introduction to Interest-rate Risk by Brian Coyle Pdf

� Worked examples illustrating key points � Explanation of complex or obscure terms � Full glossary of terms The titles in this series, all previously published by BPP Training, are now available in entirely updated and reformatted editions. Each offers an international perspective on a particular aspect of risk management. Topics include interest-rate exposures, fixed or floating-rate interest, term of funding and the yield curve, forward rates and the yield curve and basis risk, gap exposure, and price risk.

Author : Andreas Jobst,Huidan Lin
Publisher : International Monetary Fund
Page : 48 pages
File Size : 55,9 Mb
Release : 2016-08-10
Category : Business & Economics
ISBN : 9781475524475

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Negative Interest Rate Policy (NIRP) by Andreas Jobst,Huidan Lin Pdf

More than two years ago the European Central Bank (ECB) adopted a negative interest rate policy (NIRP) to achieve its price stability objective. Negative interest rates have so far supported easier financial conditions and contributed to a modest expansion in credit, demonstrating that the zero lower bound is less binding than previously thought. However, interest rate cuts also weigh on bank profitability. Substantial rate cuts may at some point outweigh the benefits from higher asset values and stronger aggregate demand. Further monetary accommodation may need to rely more on credit easing and an expansion of the ECB’s balance sheet rather than substantial additional reductions in the policy rate.

Author : Sanjay K. Nawalkha,Gloria M. Soto,Natalia A. Beliaeva
Publisher : John Wiley & Sons
Page : 429 pages
File Size : 54,7 Mb
Release : 2005-05-31
Category : Business & Economics
ISBN : 9780471737445

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Interest Rate Risk Modeling by Sanjay K. Nawalkha,Gloria M. Soto,Natalia A. Beliaeva Pdf

The definitive guide to fixed income valuation and risk analysis The Trilogy in Fixed Income Valuation and Risk Analysis comprehensively covers the most definitive work on interest rate risk, term structure analysis, and credit risk. The first book on interest rate risk modeling examines virtually every well-known IRR model used for pricing and risk analysis of various fixed income securities and their derivatives. The companion CD-ROM contain numerous formulas and programming tools that allow readers to better model risk and value fixed income securities. This comprehensive resource provides readers with the hands-on information and software needed to succeed in this financial arena.

Author : Jack Clark Francis,Avner S. Wolf
Publisher : Irwin Professional Publishing
Page : 832 pages
File Size : 40,9 Mb
Release : 1994
Category : Business & Economics
ISBN : 1556233825

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The Handbook of Interest Rate Risk Management by Jack Clark Francis,Avner S. Wolf Pdf

Risk management products and derivatives have grown ever more numerous and diverse since the late 1980s. Investors need to know which ones will best serve their needs in today's dynamic bond market. This book reveals how more than three dozen experts control and preserve the value of their own fixed income portfolios--from choosing the right risk management product to monitoring and evaluating the effectiveness of hedge management strategies. Shows investors how to make the best use of swaps, options, futures, and other risk management products in the market; identify and measure a portfolio's or corporation's risk exposure; and more.

Author : Lin Chen
Publisher : Springer Science & Business Media
Page : 158 pages
File Size : 49,8 Mb
Release : 2012-12-06
Category : Business & Economics
ISBN : 9783642468254

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Interest Rate Dynamics, Derivatives Pricing, and Risk Management by Lin Chen Pdf

There are two types of tenn structure models in the literature: the equilibrium models and the no-arbitrage models. And there are, correspondingly, two types of interest rate derivatives pricing fonnulas based on each type of model of the tenn structure. The no-arbitrage models are characterized by the work of Ho and Lee (1986), Heath, Jarrow, and Morton (1992), Hull and White (1990 and 1993), and Black, Dennan and Toy (1990). Ho and Lee (1986) invent the no-arbitrage approach to the tenn structure modeling in the sense that the model tenn structure can fit the initial (observed) tenn structure of interest rates. There are a number of disadvantages with their model. First, the model describes the whole volatility structure by a sin gle parameter, implying a number of unrealistic features. Furthennore, the model does not incorporate mean reversion. Black-Dennan-Toy (1990) develop a model along tbe lines of Ho and Lee. They eliminate some of the problems of Ho and Lee (1986) but create a new one: for a certain specification of the volatility function, the short rate can be mean-fteeting rather than mean-reverting. Heath, Jarrow and Morton (1992) (HJM) construct a family of continuous models of the term struc ture consistent with the initial tenn structure data.

Author : Steven M. Bragg
Publisher : John Wiley & Sons
Page : 309 pages
File Size : 51,9 Mb
Release : 2010-03-02
Category : Business & Economics
ISBN : 9780470497081

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Treasury Management by Steven M. Bragg Pdf

TREASURY MANAGEMENT The Practitioner's Guide Treasury Management: The Practitioner's Guide describes all aspects of the treasury function. This comprehensive book includes chapters covering the treasury department, cash transfer methods, cash forecasting, cash concentration, working capital management, debt management, equity management, investment management, foreign exchange risk management, interest risk management, clearing and settlement systems, and treasury systems. If you are a treasurer, CFO, cash manager, or controller, Treasury Management: The Practitioner's Guide allows you to quickly grasp the real world of treasury management and the many practical and strategic issues faced by treasurers and financial professionals today.

Author : Claudia M. Buch
Publisher : Unknown
Page : 60 pages
File Size : 46,7 Mb
Release : 2016
Category : Electronic
ISBN : OCLC:1306165241

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In Search for Yield? Survey-Based Evidence on Bank Risk Taking by Claudia M. Buch Pdf

There is growing consensus that the conduct of monetary policy can have an impact on stability through the risk-taking incentives of banks. Falling interest rates might induce a 'search for yield' and generate incentives to invest into risky activities. This paper provides evidence on the link between monetary policy, commercial property prices, and bank risk taking. We use a factor-augmented vector autoregressive model (FAVAR) for the U.S. for the period 1997-2008. We include standard macroeconomic indicators and factors summarizing information provided in the Federal Reserve's Survey of Terms of Business Lending. These data allow modeling the reactions of banks' new lending volumes and prices as well as the riskiness of new loans. We do not find evidence for increased risk taking for the entire banking system after a monetary policy loosening or an unexpected increase in property prices. This masks, however, important differences across banking groups. Small domestic banks increase their exposure to risk, foreign banks lower risk, and large domestic banks do not change their risk exposure.

Author : Mr.Luc Laeven,Mr.Giovanni Dell'Ariccia,Mr.Robert Marquez
Publisher : International Monetary Fund
Page : 38 pages
File Size : 43,8 Mb
Release : 2010-12-01
Category : Business & Economics
ISBN : 9781455210831

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Monetary Policy, Leverage, and Bank Risk Taking by Mr.Luc Laeven,Mr.Giovanni Dell'Ariccia,Mr.Robert Marquez Pdf

We provide a theoretical foundation for the claim that prolonged periods of easy monetary conditions increase bank risk taking. The net effect of a monetary policy change on bank monitoring (an inverse measure of risk taking) depends on the balance of three forces: interest rate pass-through, risk shifting, and leverage. When banks can adjust their capital structures, a monetary easing leads to greater leverage and lower monitoring. However, if a bank's capital structure is fixed, the balance depends on the degree of bank capitalization: when facing a policy rate cut, well capitalized banks decrease monitoring, while highly levered banks increase it. Further, the balance of these effects depends on the structure and contestability of the banking industry, and is therefore likely to vary across countries and over time.

Author : Frank J. Fabozzi
Publisher : Unknown
Page : 336 pages
File Size : 45,5 Mb
Release : 1996-08-15
Category : Business & Economics
ISBN : UOM:35128001987930

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Measuring and Controlling Interest Rate Risk by Frank J. Fabozzi Pdf

Fabozzi provides an explanation of concepts such as duration and convexivity, as well as more advanced topics such as probability distributions and regression analysis. He also gives keys to using derivatives to control interest rate risk