Search results for "IT risk"
showing 10 items of 74 documents
Credit risk and efficiency in the European banking system: A three-stage analysis
2002
Increased competition and the attempts of European banks to increase their presence in other markets may have affected the efficiency and credit risk in the banking system. The first aspect is the incentive in reducing costs in order to gain in competitiveness. The second is associated with their lack of knowledge of such markets and/ or acceptance of a higher risk in order to increase their market share. Despite the importance of these aspects, banking literature has usually analysed the effects of competition on the efficiency of banking systems without considering these aspects. The few studies that attempt to obtain risk adjusted efficiency measures do not consider that part of the risk…
Is There a Credit Risk Anomaly in FX Markets?
2015
This paper explores whether a link between sovereign credit ratings and currency returns exists. Perhaps contrary to expectations, it finds that currencies of countries with higher credit risk tend to generate lower returns than those with a lower credit risk. The credit risk spread cannot be explained by standard risk factors.
Robust Recovery Risk Hedging: Only the First Moment Matters
2009
Credit derivatives are subject to at least two sources of risk: the default time and the recovery payment. This paper examines the impact of modeling the recovery payment on hedging strategies in a reduced-form model as well as a structural model. We show that all hedging approaches based on a quadratic criterion do only depend on the expected recovery payment at default and not the whole shape of the recovery payment distribution if the underlying hedging instrument (say, a defaultable zero coupon bond) jumps to or reaches a pre-specified value when the credit event occurs. This justifies assuming a \emph{certain} recovery rate conditional on default time and interest rate level. Hence, th…
The Market Price of Credit Risk and Economic States
2015
This paper proposes a market-wide credit risk factor for the US stock market and investigates its properties that are dependent on economic conditions. The market price of credit risk is found to be statistically significantly negative, supporting earlier studies. However, a sample-split analysis reveals that this negative pay-off is non-existent in a later subsample, indicating that the credit risk puzzle is based on temporary mispricing related to the earlier subsample. Further investigation shows that mispricing in the earlier period was mainly driven by positive pay-offs of low credit risk firms, while high credit risk firms did not generate significant returns in any of the sub-periods.
A BDI agent system for credit risk assessment based on fuzzy logic
2007
Credit risk has always been an important issue for banks and other financial intermediaries. A reliable and consistent computing system is necessary to simplify the decision making process in uncertain domains such as the assessment of credit risk. In recent years fuzzy logic techniques have been in their wide-ranging use in modeling of uncertainties, vagueness, impreciseness and the human thought process. Therefore in this paper we present a fuzzy logic based intelligent system for the assessment of credit risk. It aims at efficiently and intelligently managing the process, handling its complexity, and monitoring large amounts of dynamic information in a distributed way, by using a society…
Predicting Cryptocurrency Defaults
2019
We examine all available 146 Proof-of-Work based cryptocurrencies that started trading prior to the end of 2014 and track their performance until December 2018. We find that about 60% of those cryptocurrencies were eventually in default. The substantial sums of money involved mean those bankruptcies will have an enormous societal impact. Employing cryptocurrency-specific data, we estimate a model based on linear discriminant analysis to predict such defaults. Our model is capable of explaining 87% of cryptocurrency bankruptcies after only one month of trading and could serve as a screening tool for investors keen to boost overall portfolio performance and avoid investing in unreliable crypt…
Credit-Based Insurance Scores: some Observations in the Light of the European General Data Protection Regulation
2020
Despite the differences between credit risk and insurance risk, in many countries large insurance companies include credit history amongst the information to be taken into account when assigning consumers to risk pools and deciding whether or not to offer them an auto or homeowner insurance policy, or to determine the premium that they should pay. In this study, I will try to establish some conclusions concerning the requirements and limits that the use of credit history data by insurers in the European Union should be subject to. In order to do this, I shall focus my attention primarily on Regulation (EU) 2016/679. This regulation, that came into force on 24 May 2018, not only forms the ba…
- CREDIT RISK AND EFFICIENCY IN THE EUROPEAN BANKING SYSTEMS: A THREE-STAGE ANALYSIS
1999
Increased competition and the attempts of European banks to increase their presence in other markets may have affected the efficiency and credit risk. The first of this aspects is based on the incentive to the banks to reduce cost in order to gain in competitiveness. The second is associated to their lack of knowledge of such markets and/or acceptance of a higher risk in order to increase their market share. Despite the importance of these aspects, banking literature has usually analyzed the effects of competition on the efficiency of banking systems without considering these aspects. The few studies that attempt to obtainrisk adjusted efficiency measures do not consider that part of the ri…
Domain specific simulation language for IT risk assessment
2011
Information technology systems represent the backbone of a company's operational infrastructure. A company's top management typically ensures that computer software and hardware mechanisms are adequate, functional and in adherence with regulatory guidelines and industry practices. Nowadays, due to depressed economic and increased intensity of performed operations, business highly recognizes the influence of effective Information Technology risk management on profitability. Design of Unified Modelling Language (UML) based Domain Specific language (DSL) described in this paper achieves synergy from in IT industry widely used UML modelling technique and the domain specific risk management exte…
Potential spillovers from the banking sector to sovereign credit ratings
2020
The global financial crisis and European sovereign debt crisis underlined the links between the banking sector and sovereign risk. This paper uses a machine learning technique (random forest regres...